Attached files
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, 2016 |
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: | 000-53816 |
| KMP FUTURES FUND I LLC |
| (Exact name of the Registrant as specified in its charter) |
| Delaware | 20-5914530 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 680 Fifth Avenue, Suite# 1901, New York, New York | 10019 |
| (Address of principal executive offices) | (Zip Code) |
| (212) 596-3480 |
| (The 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:
| Limited Liability Company Interests |
| (Title of class) |
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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 II of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer o | Accelerated filer o | |
| Non-accelerated filer x | Smaller Reporting Company o |
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
The Registrant has no voting shares or public float. The value of Interests in the Registrant as of June 30, 2016 is $6,261,770.
KMP
Futures Fund I LLC
(a Delaware limited liability company)
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| ITEM 1. | BUSINESS |
Introduction
General
KMP Futures Fund I LLC (the “Registrant”) is a limited liability company organized under the laws of Delaware on November 20, 2006 which commenced operations on January 1, 2007. The Registrant will terminate on December 31, 2056 unless terminated sooner under the provisions of the limited liability company agreement of the Registrant (the “Operating Agreement”). The Registrant was formed to engage in the direct or indirect speculative trading of a diversified portfolio of futures contracts, options on futures contracts and forward currency contracts and may, from time to time, engage in cash and spot transactions. Investors holding interests in the Registrant are collectively referred to herein as the “Members” or the “Individual Members”. The fiscal year end of the Registrant is December 31.
Effective November 12, 2009, the Registrant became a reporting company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Moreover, as a commodity pool, the Registrant became subject to the record keeping and reporting requirements of the Commodity Futures Trading Commission (“CFTC”) and the National Futures Association (“NFA”).
The Registrant’s Objectives
The Registrant’s objectives are:
| ● | Significant profits over time; |
| ● | Performance volatility commensurate with profit potential; |
| ● | Controlled risk of loss; and |
| ● | Diversification within a traditional portfolio, typically consisting entirely of “long” equity and debt positions and reduced dependence on a single nation’s economy, by accessing global financial, commodity and other non-financial futures markets. |
The Registrant’s potential for aggressive capital growth arises from the profit possibilities offered by the global futures, forward and options markets and the skills of the professional trading organization(s) selected to manage the assets of the Registrant. The fact that the Registrant can profit from both rising and falling markets adds an element of profit potential that is not present in long-only strategies. However, the Registrant can also incur losses from both rising and falling markets that adds to the risk of loss. In addition to its profit potential and risk of loss, the Registrant also could help reduce the overall volatility, or risk, of a portfolio. By investing in markets that operate independently from U.S. stock and bond markets (and therefore, may be considered as non-correlated), the Registrant may provide positive returns even when U.S. stock and bond markets are experiencing flat to negative performance and may provide negative returns even when U.S. stock and bond markets are experiencing flat to positive performance. Non-correlation should not be confused with negative correlation, where the performance would be exactly opposite between the Registrant and U.S. stock and bond markets.
The Managing Member makes no guarantee that the investment objectives for the Registrant will be achieved.
Past performance is not necessarily indicative of future results.
Managing Member and its Affiliates
Effective March 17, 2014, Kenmar Preferred Investments, L.P. changed its name and form of entity to Kenmar Preferred Investments, LLC (“Kenmar Preferred” or the “Managing Member”). Kenmar Preferred or Managing Member refers to either Kenmar Preferred Investments, L.P. or Kenmar Preferred Investments, LLC depending on the applicable period discussed. Kenmar Preferred is the Managing Member of the Registrant, and has administrative authority over the operations of the Registrant.
Effective March 17, 2014, Clarity Managed Account & Analytics Platform, L.P. changed its name and form of entity to Clarity Managed Account & Analytics Platform, LLC (“Clarity”). Clarity refers to either Clarity Managed Account & Analytics Platform, L.P. or Clarity Managed Account & Analytics Platform, LLC, depending on the applicable period discussed.
Effective March 17, 2014, Kenmar Global Investment Management, L.P. changed its name and form of entity to Kenmar Global Investment Management, LLC (the “Asset Allocator”). Asset Allocator refers to either Kenmar Global Investment Management, L.P. or Kenmar Global Investment Management, LLC, depending on the applicable period discussed. The Asset Allocator, an affiliate of the Managing Member, is the Asset Allocator of CTA Choice Fund LLC (“CTA Choice”). Pursuant to the Asset Allocation Agreements between the Managing Member, the Asset Allocator, and each interestholder, the Asset Allocator determines the trading level of each interestholder’s assets and reallocates among the separate series of CTA Choice as agreed upon with the Trading Advisors. On March 30, 2016, Kenmar Global Investment Management, LLC was put into liquidation effective December 31, 2015, and Clarity was appointed as the Asset Allocator of the Registrant. While the Asset Allocator receives no fees for such services from the Registrant, the Asset Allocator is paid management and incentive fees directly from the interestholders pursuant to each interestholder’s Asset Allocation Agreement. The Registrant pays no management or incentive fees to the Asset Allocator.
The Managing Member’s predecessor and affiliates have been sponsoring and managing single and multi-advisor funds for over two decades. Effective April 1, 2016, the principal office of the Registrant is c/o Kenmar Preferred Investments, LLC, 680 Fifth Avenue, Suite 1901, New York, New York 10019. Prior to April 1, 2016, the principal office of the Registrant is c/o Kenmar Preferred Investments, LLC, 1211 Avenue of the Americas, Suite 2701, New York, New York 10036. Prior to April 1, 2014, the principal office of the Registrant was 900 King Street, Suite 100, Rye Brook, New York 10573. The telephone number of the Registrant and the Managing Member is (212) 596-3480.
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The Managing Member has substantial experience in selecting and monitoring Trading Advisors, asset allocation and overall portfolio design using quantitative and qualitative methods.
The Managing Member monitors the trading activity and performance of the Trading Advisors and adjusts the overall leverage at which the Registrant trades. The commitment of the Registrant to the Trading Advisors may exceed 100% of the Registrant’s total equity if the Managing Member decides to strategically allocate notional equity to such Trading Advisors. This may result in increased profits or larger losses than would otherwise result. There likely will be periods in the markets during which it is unlikely that the Trading Advisors will be profitable. By having the ability to deleverage the Registrant’s market commitment to below its actual equity during such periods, the Managing Member could help preserve capital while awaiting more favorable market cycles.
The Managing Member also performs ongoing due diligence with respect to the Trading Advisors. If the Managing Member determines that the Trading Advisors have departed from its program or stated trading methodology or has exceeded its stated risk parameters, the Managing Member, on behalf of the Registrant, will take such actions as it deems appropriate, which may include terminating the Trading Advisors. Similarly, if the Managing Member’s ongoing due diligence leads the Managing Member to determine that it is in the best interests of the Registrant to add an additional trading advisor; it will do so in its sole discretion. If the Managing Member concludes, based upon its perception of market or economic conditions, that it is appropriate to allocate assets of the Registrant to a different trading program run by the Trading Advisors, it will do so. The Managing Member may select a replacement if any of the Trading Advisors resign or are terminated, or may select additional Trading Advisors at its discretion.
On January 3, 2017, the Board of Directors of Kenmar Preferred, determined to dissolve the Registrant effective as of the close of business on January 31, 2017 because Kenmar Preferred has determined that Registrant’s aggregate net assets in relation to its operating expenses make it unreasonable to continue the business of the Registrant.
Effective February 1, 2017, the Registrant contributed all of its assets into World Monitor Trust III Series J (“Series J”), a business trust organized under the laws of Delaware.
Members in the Registrant received a pro rata in-kind distribution of the Series J units effective February 1, 2017, which resulted for all Members in the Company to receive a direct ownership interest in Series J.
The Registrant filed a Form 15 with the SEC on February 2, 2017, de-registering the interests of the Company under Section 12(g) of the Securities Exchange Act of 1934.
The Trading Advisors
The Registrant allocates a portion of its net assets (“Allocated Assets”) to commodity Trading Advisors (each, a “Trading Advisor” and collectively, the “Trading Advisors”). Each Trading Advisor manages the portion of the assets of the Registrant allocated to such Trading Advisor and makes the trading decisions in respect of the assets allocated to such Trading Advisor. The Managing Member may terminate any current Trading Advisor or select new Trading Advisors from time to time in its sole discretion. In the future, the Managing Member may determine to access certain Trading Advisors through separate investee pools.
In general, the Registrant expects to access the Trading Advisors through various series of CTA Choice. CTA Choice is an “umbrella fund” having multiple segregated series, each of which is referred to herein as a “CTA Fund” or an “Affiliated Investment Fund”. Each CTA Fund has its own clearly-defined investment objective and strategies that are implemented by a Trading Advisor. Clarity an affiliate of Kenmar Preferred, serves as the managing member for CTA Choice. Until April 30, 2015, the Registrant allocated approximately one-half of its Allocated Assets to each of the following CTA Funds:
| ● | CTA Choice WTN (“WTN”), managed by Winton Capital Management Limited (“Winton”), pursuant to its Diversified Program, which is a systematic, technical diversified program; and |
| ● | CTA Choice EGLG (“EGLG”), managed by Eagle Trading Systems Inc. (“Eagle”), pursuant to its Global Program, which is a systematic, technical long term diversified program. |
Effective May 1, 2015, the Registrant allocates approximately one-half of its Allocated Assets to each WTN and CTA Choice QNTM (“QNTM”), which is managed by Quantmetrics Capital Management LLP (“Quantmetrics”) pursuant to its QM Multi Strategy Program, after fully redeeming from EGLG.
Effective January 1, 2016, the Registrant allocates approximately one-half of its Allocated Assets to each CTA Choice ISAT (“ISAT”) managed by Deep Field Capital AG (“Deep Field”), pursuant to its Singularity Managed Futures Program and CTA Choice KEY (“KEY”), managed by KeyQuant S.A.S (“KeyQuant”), pursuant to its Key Trends Program, after fully redeeming from QNTM and WTN on December 31, 2015.
Winton’s Diversified Program employs a computer-based system to engage in the speculative trading of international futures, options and forwards markets, government securities such as bonds, as well as certain over the counter (“OTC”) instruments, which may include foreign exchange and interest rate forward contracts and swaps. Winton seeks to combine highly liquid financial instruments offering positive but low Sharpe ratios (meaning that profits have been achieved with a certain level of risk) and generally low correlation over the long term to other markets such as equities and fixed income.
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Eagle’s Global Program is a technical, trend-following system developed, based on Eagle’s extensive experience in observing and trading the global markets, to capture a well-structured trading philosophy. The trading philosophy incorporates trend following elements, money management principles, predetermined risk parameters and volatility adjustment features. The system is designed to trade in a wide range of global futures markets - currencies, fixed income, energies, commodities and stock indices - that exhibit orderly intermediate and long-term trends, and adjust to changes in market environment with no predetermined allocation to any one sector. Eagle analyzes typical behavior and volatility patterns of various markets. The system seeks markets with potentially good risk/reward profiles while attempting to avoid markets characterized by excessive volatility and sharp price corrections. An attempt is made to participate in markets which exhibit favorable “signal to noise” characteristics. Money management and risk control disciplines serve to attempt to limit downside risk.
Quantmetrics’ QM Multi Strategy Program follows the QM Directional Strategy and the QM Premier Strategy. The QM Directional Strategy is a quantitative short term directional futures strategy. The strategy trades futures and foreign exchange with a holding period ranging from 5 minutes to a few days. The aim is to provide investors with long-term capital appreciation by realizing many short-term gains across a number of different asset classes. The investment approach identifies and captures market inefficiencies using statistical and econometric models. As the models selectively choose the timing of the trades, it is ideally positioned to benefit from liquidity driven price shocks. The QM Premier Strategy is a quantitative market neutral futures strategy. The strategy trades futures with a holding period from 20 minutes to 1 day. The aim is to provide investors with long-term capital appreciation by seeking to profit from short term liquidity imbalances in pairs of equity index futures. The investment approach identifies and captures market inefficiencies using statistical and econometric models. Disciplined risk management is built into each trading algorithm, with time stops strictly adhered to.
KeyQuant’s Key Trends program is a medium to long-term trend following trading program. Analysis allows capturing major economic cycles. The Trading Program aims to profit more from market trends thanks to its continuous analysis of trends. Moreover, the Trading Program offers a unique portfolio allocation mechanism known as the GEF. In the case of an uncertain economic scenario, the GEF systematically adjusts the volatility target downwards to account for uncertainty in trends.
Deep Field’s Singularity Managed Futures Program is a fully automated managed futures program which executes a purely systematic trading approach using quantitative analysis of real-time price data to detect market trends. The highly reactive system trades liquid futures markets, across all asset classes: equities, fixed income, commodities and FX. Singularity Managed Futures Program’s objective is to achieve appreciation of clients’ assets through speculative trading in the US and non-US futures contracts. The investment strategies employed in the Program are technical rather than fundamental in nature, i.e., they are developed from analysis of patterns of actual monthly, weekly, and daily price movements and are not based on analysis of fundamental factors such as supply and demand, general economic conditions or anticipated world events. The Program relies on historical analysis of these price patterns to interpret current market behavior and to evaluate technical indicators for trade initiations and liquidations.
The Administrator
SS&C GlobeOp Financial Services LLC (“SS&C GlobeOp” or the “Administrator”), a Delaware limited liability company located at One South Road, Harrison, NY 10528, has been retained by the Registrant to serve as the Registrant’s administrator and provide certain administration and accounting services. Effective February 1, 2016, Gemini Hedge Fund Services LLC (“Gemini” or the “Administrator”), a Nebraska limited liability company located at 80 Arkay Drive, Hauppauge, NY 11788, was appointed by the Registrant to serve as the Registrant’s administrator and provide certain administration and accounting services.
The Administrator performs or supervises the performance of services necessary for the operation and administration of the Registrant (other than making investment decisions), including administrative and accounting services. The Administrator also calculates the Registrant’s Net Asset Value. In addition, the Administrator maintains certain books and records of the Registrant, including certain books and records required by CFTC Rule 4.23(a).
Fees and Expenses
Management Fee
The Registrant pays the Managing Member in advance a monthly management fee equal to 1/12th of 6.00% (6.00% per annum) of the Registrant’s Net Asset Value (defined below) at the beginning of each month, See Note 4 of the Registrant’s financial statements included in its annual report for the year ended December 31, 2016 (the “Registrant’s 2016 Annual Report”), which is filed as an exhibit hereto.
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“Net Asset Value” is the total assets of the Registrant less total liabilities of the Registrant, each determined on the basis of accounting principles generally accepted in the United States of America.
The Registrant, indirectly through its investment in Affiliated Investment Funds, pays a monthly administrative services fee in the amount of 1/12th of 0.25% (0.25% per annum) of the respective CTA Fund’s beginning of month Allocated Assets to Clarity for risk management and related services with respect to monitoring the Trading Advisors.
Trading Advisors’ Fees
The Registrant, indirectly through its investment in the Affiliated Investment Funds, pays Deep Field, KeyQuant, Winton, Eagle and Quantmetrics monthly management fees at an annual rate of 0.25%, 1%, 1.5%, 2% and 1%, respectively, as defined in their respective Trading Advisory Agreements..
The Registrant, indirectly through its investment in the Affiliated Investment Funds, pays Deep Field, KeyQuant, Winton, Eagle and Quantmetrics an incentive fee accrued monthly and paid quarterly of 30%, 20%, 20%, 25% and 25%, respectively, for achieving New High Net Trading Profits as defined below.
“New High Net Trading Profits” (for purposes of calculating a Trading Advisor’s incentive fees) will be accrued monthly and paid as of the close of business of the last day of each calendar quarter (the “Incentive Measurement Date”) and will include such profits (as outlined below) since the immediately preceding Incentive Measurement Date (or, with respect to the first Incentive Measurement Date, since commencement of operations of the Registrant or the date the Trading Advisor commenced trading activities for the Registrant), each an Incentive Measurement Period. New High Net Trading Profits for any Incentive Measurement Period will be the net profits, if any, from the Trading Advisor’s trading during such period (including (i) realized trading profit (loss) plus or minus (ii) the change in unrealized trading profit (loss) on open positions), and will be calculated after the determination of certain transaction costs attributable to the Trading Advisor’s trading activities, operating expenses and the Trading Advisor’s management fee, but before deduction of any incentive fees payable during the Incentive Measurement Period. New High Net Trading Profits will not include interest earned or credited on the assets allocated to the Trading Advisor.
New High Net Trading Profits will be generated only to the extent that the cumulative New High Net Trading Profits achieved by the Trading Advisor exceed the highest level of cumulative New High Net Trading Profits achieved by such Trading Advisor as of a previous Incentive Measurement Date. Except as set forth below, net losses from prior months must be recouped before New High Net Trading Profits can again be generated.
If a withdrawal or distribution occurs or if a Trading Advisor’s advisory agreement with the relevant CTA Fund is terminated at any date that is not an Incentive Measurement Date, the date of the withdrawal or distribution or termination will be treated as if it were an Incentive Measurement Date. New High Net Trading Profits for an Incentive Measurement Period shall exclude capital contributions allocated to the Trading Advisor in an Incentive Measurement Period, distributions or redemptions paid or payable from the Trading Advisor’s account during an Incentive Measurement Period and any loss carry-forward attributable to the Trading Advisor will be reduced in the same proportion that the value of the assets allocated away from the Trading Advisor comprises of the value of the assets allocated to the Trading Advisor prior to such allocation away from the Trading Advisor. In calculating New High Net Trading Profits, incentive fees paid for a previous Incentive Measurement Period will not reduce cumulative New High Net Trading Profits in subsequent periods.
Brokerage Commissions and Fees
The Registrant indirectly pays to the clearing brokers all brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with the Registrant’s trading activities. These activities are charged indirectly through the Registrant’s Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds. On average, total charges paid to the clearing brokers are expected to be less than $10.00 per round-turn trade, although the clearing broker’s brokerage commissions and trading fees will be determined on a contract-by-contract basis. The exact amount of such brokerage commissions and trading fees to be incurred is impossible to estimate and will vary based upon a number of factors including the trading frequency of each Trading Advisor, the types of instruments traded, transaction sizes, degree of leverage employed and transaction rates in effect from time to time.
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Routine Operational, Administrative and Other Ordinary Expenses
The Registrant pays directly or indirectly all of its routine operational, administrative and other ordinary expenses, including, but not limited to, (i) legal, bookkeeping, accounting, custodial, administration (including, without limitation, the costs and expenses of the Administrator), auditing, tax preparation charges and related charges of the Registrant (including reimbursement of the Managing Member on a reasonable time-spent basis, for certain legal, accounting, administrative and registrar and transfer agent work performed by certain of the Managing Member’s personnel for and on behalf of the Registrant), as well as printing and other related expenses, (ii) investment related expenses, including, but not limited to brokerage commissions, “bid-ask” spreads, mark-ups, margin interest and other transactional charges and clearing fees, as well as banking, sales and purchase commissions and charges and exchange fees, fees and charges of other custodians and clearing agencies, interest and commitment fees on loans and debit balances, income taxes, withholding taxes, transfer taxes and other governmental charges and duties, and other transactional charges and clearing fees incurred by the Trading Advisor on behalf of the Registrant, the Registrant’s pro rata share of the expenses of any Affiliated Investment Fund into which it invests, and any due diligence expenses incurred in selecting and monitoring the Trading Advisor and any Affiliated Investment Fund, (iii) operational and overhead expenses of the Registrant, including but not limited to, photocopying, postage, and telephone expenses, (iv) preparation of monthly, quarterly, annual and other reports required by applicable Federal and state regulatory authorities, (v) the Registrant’s meetings and preparing, printing and mailing of proxy statements and reports to Members, (vi) client relations and services, and (vii) computer equipment, system maintenance and other technology-related expenses.
Extraordinary Fees and Expenses
The Registrant pays all its extraordinary fees and expenses, if any, and its allocable portion of all extraordinary fees and expenses of the Registrant generally, if any, as determined by the Managing Member. Extraordinary fees and expenses are fees and expenses that are non-recurring and unusual in nature, such as legal claims and liabilities and litigation costs and any permitted indemnification payments related thereto. Extraordinary fees and expenses shall also include material expenses that are not currently anticipated obligations of the Registrant or of managed futures funds in general, such as the payment of partnership taxes or governmental fees associated with payment of such taxes. Routine operational, administrative and other ordinary expenses will not be deemed extraordinary expenses. Any fees and expenses imposed on the Registrant due to the status of an individual shall be paid by such individual or the Registrant, not the Managing Member.
Expense Cap
Routine operational, administrative and other ordinary expenses, other than the Managing Member’s management fee, the fees to be paid to the Registrant’s Trading Advisor(s), Brokerage Commissions and extraordinary fees and expenses, are limited to 1.50% of average Net Asset Value per annum, See Note 3 of the Registrant’s 2016 Annual Report, which is filed as an exhibit hereto. In the event fees and expenses for such items exceed such amount, the Managing Member will pay such amounts.
Redemption Charge
There is no redemption charge in respect of Interests.
Competition
The Registrant competes with other private and publicly offered commodity pools, as well as other alternative investments such as REITs and oil and gas limited partnerships and hedge funds. The Registrant operates in a competitive environment in which it faces several forms of competition, including, without limitation:
| ● | The Registrant competes with other commodity pools and other investment vehicles for Members. |
| ● | The Trading Advisor may compete with other traders in the markets in establishing or liquidating positions on behalf of the Registrant. |
Employees
The Registrant has no employees. Management and administrative services for the Registrant are performed by the Managing Member or third parties pursuant to the Operating Agreement, as further discussed in Notes 3 and 4 of the Registrant’s 2016 Annual Report, which is filed as an exhibit hereto.
Financial Information about Segments
The Registrant’s business constitutes only one segment for financial reporting purposes. The Registrant does not engage in the production or sale of any goods or services. The objective of the Registrant’s business is appreciation of its assets through speculative trading in commodity interests. Financial information about the Registrant’s business, as of December 31, 2016, is set forth under Items 6, 7, and 8 herein.
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Financial Information about Geographic Areas
Although the Registrant has indirect exposure to the global futures, forward and option markets, it does not have operations outside of the United States.
Available Information
The Registrant files an annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports with the Securities and Exchange Commission (the “SEC”). You may read and copy any document filed by the Registrant at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information on the Public Reference Room. The Registrant does not maintain an internet website; however, the Registrant’s SEC filings are available to the public from the EDGAR database on the SEC’s website at http://www.sec.gov. The Registrant’s CIK number is 0001474307.
| ITEM 1A. | RISK FACTORS |
THE INTERESTS ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. THEY ARE ONLY SUITABLE FOR PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
Strategy and Investment-Related Risks
| (1) | Loss of Capital; No Guarantee of Profit |
All investments risk the loss of capital. While the Managing Member believes that the Registrant’s investment program may moderate this risk to some degree through a diversification of investment strategies and markets used by the Trading Advisors to which the Registrant will allocate assets, no guarantee or representation is made that the Registrant’s program will be successful or that Members will not lose some or all of their investment in the Registrant. The Registrant’s investment program includes the selection of Trading Advisors who utilize such investment techniques as short sales, leverage, uncovered option transactions, and limited diversification, which practices can, in certain circumstances, maximize the adverse impact on invested assets.
| (2) | Speculative and Volatile Markets and Highly Leveraged Trading |
The markets in which the Registrant directly and indirectly trades are speculative, highly leveraged and involve a high degree of risk. Each Trading Advisor’s trading considered individually involves a significant risk of incurring large losses, and there can be no assurance that the Registrant will not incur such losses.
Futures and forward prices are volatile. Volatility increases risk, particularly when trading with leverage. Trading on a highly leveraged basis, even in stable markets involves risk; doing so in volatile markets necessarily involves a substantial risk of sudden, significant losses. Due to such leverage, even a small movement in price could cause large losses for the Registrant. Market volatility will increase the potential for large losses. Market volatility and leverage mean that the Registrant could incur substantial losses, potentially impairing its equity base and ability to achieve its long-term profit objectives even if favorable market conditions subsequently develop.
Supply and demand for investments change rapidly and are affected by a variety of factors, including interest rates, rates of inflation and general trends in the overall economy or particular industrial or other economic sectors. Government actions, especially those of the Federal Reserve Board and other central banks, have a profound effect on interest rates that, in turn, affect the price of investments. In addition, a variety of other factors that are inherently difficult to predict, such as domestic and international political developments, governmental trade and fiscal policies, monetary and exchange control programs, currency devaluations and revaluations; and emotions of the marketplace, patterns of trade and war or other military conflict can also have significant effects on the markets. None of these factors can be controlled by the Trading Advisors. Trading Advisors may have only limited ability to vary their portfolios in response to changing economic, financial and investment conditions. No assurance can be given as to when or whether adverse events might occur which could cause significant and immediate loss in value of the Registrant. Even in the absence of such events, trading investments can quickly lead to large losses. No assurance can be given that the advice of the Trading Advisors will result in profitable trades for the Registrant or that the Registrant will not incur substantial losses.
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In addition to the leveraged trading described above, the Managing Member has the ability to further increase the leverage of the Registrant by allocating notional equity to one or more of its Trading Advisors (in a maximum amount of up to 20% of Net Asset Value), which would then permit such Trading Advisor(s) to trade the account of the Registrant as if more equity were committed to such accounts than is, in fact, the case. Although the Managing Member has the option to allocate additional notional equity to a Trading Advisor, the Managing Member has no current plans to do so.
| (3) | Past Performance |
The past investment performance of the Managing Member and the Trading Advisors is not necessarily indicative of the Registrant’s futures results. You should not assume that any Trading Advisor’s future trading decisions will create profit, avoid substantial losses or result in performance for the Registrant that is comparable to that Trading Advisor’s or to the Managing Member’s past performance. No assurance can be given that the Managing Owner will succeed in meeting the investment objectives of the Registrant. You may lose all or substantially all of your investment in the Registrant.
Because you and other Members will acquire and redeem Interests at different times, you may experience a loss on your Interests even though the Registrant as a whole is profitable and even though other Members experience a profit. The past performance of the Registrant may not be representative of your investment experience in it.
| (4) | Importance of General Market Conditions to Profitability |
General economic and business conditions may adversely affect a Trading Advisor’s activities. The level and volatility of interest rates, the prices of investments and the extent and timing of Member participation in the financial markets for both equities and interest sensitive investments may affect the value of investments purchased by the Registrant. Unexpected volatility or illiquidity in the markets in which the Registrant, directly or indirectly, holds positions could impair the Registrant’s ability to carry out its business or cause it to incur losses. Often the most unprofitable market conditions for the Registrant are those in which prices “whipsaw”, that is, such prices move quickly upward (or downward), then reverse, then move upward (or downward) again, then reverse again. In such conditions, the Trading Advisors may establish positions based on incorrectly identifying both the brief upward or downward price movements as trends, whereas in fact no trends sufficient to generate profits develop.
| (5) | The Registrant Incurs Substantial Charges |
The Registrant must generate profits and interest income which exceed its fixed costs in order to avoid depletion of its assets. The Registrant is subject to the substantial fees and expenses described herein regardless of its performance. In addition, the Registrant pays incentive fees to each Trading Advisor based on such Trading Advisor’s performance and not on the performance of the Registrant as a whole.
The Registrant is also subject to brokerage fees and administrative expenses directly or indirectly. On the Registrant’s forward trading, “bid-ask” spreads are incorporated into the pricing of the Registrant’s forward contracts by its counterparties in addition to the brokerage fees paid by the Registrant. It is not possible to quantify the “bid-ask” spreads paid by the Registrant because the Registrant cannot determine the profit its counterparty is making on the forward trades into which it enters. Consequently, the expenses of the Registrant (including the higher Trading Advisor base fee and incentive fee) could, over time, result in significant losses to your investment therein. You may never achieve profits.
| (6) | There are Disadvantages to Making Trading Decisions Based on Technical Strategies |
The trading systems used by certain Trading Advisors are based in large part on trading strategies that seek to take into account certain “technical” factors in identifying price trends and price movements. The buy and sell signals generated by a technical trading system are not based on analysis of fundamental supply and demand factors, general economic factors, or anticipated world events but are derived from a study of actual daily, weekly, and monthly price fluctuations. The profitability of any technical trading strategy depends upon the occurrence in the future of major sustained price moves or trends in some futures and other investments traded. A danger for trend-following traders is whip-saw markets, that is, markets in which a potential price trend may start to develop but reverses before an actual trend is realized. A pattern of false starts may generate repeated entry and exit signals in technical systems, resulting in unprofitable transactions. In the past there have been periods without discernible trends and presumably similar periods will occur in the future. Any factor that may lessen the prospect of major trends in the future (such as increased governmental control of, or participation in, the markets) may reduce the prospect that any trading strategy will be profitable in the future. Any factor that would make it more difficult to execute trades at the system’s signal prices, such as a significant lessening of liquidity in a particular market, also would be detrimental to profitability. The likelihood of the Interests being profitable could be materially diminished during periods when events external to the markets themselves have an important impact on prices. During such periods, the Trading Advisors’ historic price analysis could establish positions on the wrong side of the price movements caused by such events.
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| (7) | Possible Disadvantages of Other Trend-Following Systems |
There has been a dramatic increase in recent years in both the use of trend-following strategies and the overall volume of trading and liquidity of the futures markets. This means increased trading competition among a larger number of market participants for transactions at favorable prices, which could operate to the detriment of the Registrant by preventing the Trading Advisors from effecting transactions at the desired prices. It may become more difficult for the Trading Advisors to implement their trading strategies if other commodity trading advisors using technical systems are also attempting to initiate or liquidate commodity positions at the same time as the Trading Advisors.
| (8) | Discretionary Trading Strategies May Incur Substantial Losses |
Discretionary traders make decisions on the basis of their own judgment and “trading instinct,” not on the basis of trading signals generated by any program or model. In exercising such discretion, a Trading Advisor may take positions opposite to those recommended by the Trading Advisor’s trading system or signal. Discretionary decision making may also result in a Trading Advisor’s failing to capitalize on certain price trends or making unprofitable trades in a situation where another trader relying solely on a systematic approach might not have done so. Reliance on trading judgment may, over time, produce less consistent trading results than implementing a systematic approach.
| (9) | Systematic Trading Strategies May Incur Substantial Losses |
A systematic trader will rely to some degree on judgmental decisions concerning, for example, what markets to follow and futures to trade, when to liquidate a position in a contract which is about to expire and how large a position to take in a particular futures contract. Although these judgmental decisions may have a substantial effect on a systematic trader’s performance, such trader’s primary reliance is on trading programs or models that generate trading signals. The systems utilized to generate trading signals are changed from time to time (although generally infrequently), but the trading instructions generated by the systems being used are followed without significant additional analysis or interpretation. Therefore, systematic trading may incur substantial losses by failing to capitalize on market trends that their systems would otherwise have exploited by applying their generally mechanical trading systems by judgmental decisions of employees. Furthermore, any trading system or trader may suffer substantial losses by misjudging the market. Systematic traders tend to rely on computerized programs, and some consider the prospect of disciplined trading, which largely removes the emotion of the individual trader from the trading process, advantageous. Due to their reliance upon computers, systematic traders are generally able to incorporate a significant amount of data into a particular trading decision. However, when fundamental factors dominate the market, trading systems may suffer rapid and severe losses due to their inability to respond to such factors until such factors have had a sufficient effect on the market to create a trend of enough magnitude to generate a reversal of trading signals, by which time a precipitous price change may already be in progress, preventing liquidation at anything but substantial losses.
| (10) | There are Disadvantages to Making Trading Decisions Based Upon Fundamental Analysis |
Traders that utilize fundamental trading strategies attempt to examine factors external to the trading market that affect the supply and demand for particular futures and forward contracts in order to predict future prices. Such analysis may not result in profitable trading because the analyst may not have knowledge of all factors affecting supply and demand, prices may often be affected by unrelated factors, and purely fundamental analysis may not enable the trader to determine quickly that previous trading decisions were incorrect. In addition, because of the breadth of fundamental data that exists, a fundamental trader may not be able to follow developments in all such data, but instead may specialize in analyzing a narrow set of data, requiring trading in fewer markets. Consequently, a fundamental trader may have less flexibility in adverse markets to trade other futures and forward markets than traders that do not limit the number of markets traded as a result of a specialized focus. In addition, fundamental analysis assumes that commodity markets are inefficient - i.e., that commodity prices do not reflect all available information - which some market analysts dispute.
| (11) | An Investment in Interests may not Diversify an Overall Portfolio |
Historically, managed futures have performed in a manner largely independent from the general equity and debt markets. However, if the Registrant does not perform in a non-correlated manner with respect to the general financial markets or does not perform successfully, the Managing Member cannot assure you that an investment in the Interests will provide diversification benefits. An investment in the Interests could increase, rather than reduce your overall portfolio losses during periods when the Registrant and the equity and debt markets decline in value. There is no way of predicting whether the Registrant will lose more or less than stocks and bonds in declining markets. You should therefore not consider the Interests to be a hedge against losses in your core stock and bond portfolios. Past performance is not indicative of future results.
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| (12) | Broad Indices May Perform Quite Differently From Individual Investments |
The concepts of overall portfolio diversification and non-correlation of asset classes are generally discussed and illustrated by the use of a generally accepted index that represents each asset category. Stocks are represented by the S&P 500 Index and MSCI EAFE Index; bonds are represented by the Lehman Long-Term Government Bond Index; futures funds are represented by the Barclay CTA Index; and currencies are represented by the Barclay Currency Index. Because each index is a dollar-weighted average of the returns of multiple underlying investments, the overall index return and risk may be quite different from the return of any individual investment. For example, the Barclay CTA Index is an unweighted index that attempts to measure the performance of the commodity trading advisor industry. The Index measures the combined performance of all commodity trading advisors that have more than four years of past performance. For purposes of calculating the Index, the first four years of a commodity trading advisor’s performance history is ignored. Accordingly, such index reflects the volatility and risk of loss characteristics of a very broadly diversified universe of trading advisors and not of a single fund or trading advisor. Therefore, the performance of the Registrant will be different than that of the Barclay CTA Index and the Barclay Currency Index.
| (13) | Effectiveness of Risk Reduction Techniques |
Trading Advisors may employ various risk reduction strategies designed to minimize the risk of their trading positions. A substantial risk remains, nonetheless, that such strategies will not always be possible to implement and, even when possible, will not always be effective in limiting losses. If a Trading Advisor analyzes market conditions incorrectly, or employs a risk reduction strategy that does not correlate well with a Trading Advisor’s investments, such risk reduction techniques could result in a loss, regardless of whether the intent was to reduce risk or increase return. These risk reduction techniques may also increase the volatility of the Registrant and result in a loss if the counterparty to the transaction does not perform as promised.
Risks Related to Futures Trading
The Registrant may indirectly invest in forward contracts, futures contracts (including financial futures), swaps or other futures on both U.S. and foreign markets. Trading in such interests is a highly specialized investment activity entailing greater than ordinary investment risk.
| (14) | Volatility |
Futures and forward contracts have a high degree of price variability and are subject to occasional rapid and substantial changes. Price movements of futures and forward contracts are influenced by, among other things, changing supply and demand relationships, governmental, agricultural and trade programs and policies, and national and international political and economic events. Financial instrument and foreign currency futures prices are influenced by, among other things, interest rates, changes in balances of payments and trade, domestic and international rates of inflation, international trade restrictions, and currency devaluations and revaluations. Consequently, you could lose all or substantially all of your investment in the Registrant.
| (15) | Margin |
Because the amount of margin funds necessary to be deposited with a futures clearing broker to enter into a futures, forward contract or option position is typically about 2% to 10% of the total value of the contract, an extremely high degree of leverage is obtainable in futures trading. In addition, certain of the Trading Advisors may trade using leverage through borrowing. As a result of margining, a relatively small price movement in a futures contract may result in immediate and substantial losses. Any purchase or sale of a futures or forward contract or option position may result in losses that substantially exceed the amount invested. Thus, like other highly leveraged investments, any purchase or sale of a futures contract may result in losses that substantially exceed the amount invested, although Members will not be liable for losses that exceed their investment in the Registrant.
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| (16) | Your Investment could be Illiquid |
Certain futures exchanges limit fluctuations in futures contract prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” During a single trading day no trades may be executed at prices beyond the daily limit. Once the price of a contract for a particular futures contract has increased or decreased by an amount equal to the daily limit, positions in the futures contract cannot be taken or liquidated unless both a buyer and seller are willing to effect trades at or within the limit. In the past, futures prices have moved the daily limit for several consecutive days with little or no trading. In addition, even if futures prices have not moved the daily limit, the Trading Advisors may not be able to execute futures trades at favorable prices if little trading in such contracts is taking place (a “thin” market). Similar occurrences, such as a market disruption or regulatory intervention in the futures markets, could prevent the Trading Advisors from promptly liquidating unfavorable positions and adversely affect operations and profitability. Also, there is not likely to be a secondary market for the Interests.
| (17) | Because the Registrant Does Not Acquire Any Asset with Intrinsic Value, the Positive Performance of Your Investment Is Wholly Dependent Upon an Equal and Offsetting Loss |
Futures and forward trading is a risk transfer economic activity. For every gain there is an equal and offsetting loss rather than an opportunity to participate over time in general economic growth. Unlike most alternative investments, an investment in the Registrant does not involve acquiring any asset with intrinsic value. Overall stock and bond prices could rise significantly and the economy as a whole prospers while the Registrant trades unprofitably.
| (18) | Trading on non-U.S. Exchanges and Currency Exchange Rate Fluctuations |
Certain of the Trading Advisors are expected to engage in some or all of their trading on non-U.S. exchanges and other markets located outside of the United States (“Foreign Markets”). Trading in such Foreign Markets is not regulated by any United States governmental agency and may involve certain risks not applicable to trading on United States exchanges. There is no limit to the percentage of Fund assets that may be committed to trading on Foreign Markets. Neither CFTC regulations nor regulations of any other U.S. governmental agency apply to the actual execution of transactions on Foreign Markets. Some Foreign Markets, in contrast to domestic exchanges, are “principals’ markets” in which performance is the responsibility only of the individual member with whom the trader has entered into a futures transaction and not of the exchange or clearing corporation. Due to the absence of a clearing house system on certain Foreign Markets, such markets are significantly more susceptible to disruptions than are U.S. exchanges and, therefore, trading thereon potentially is subject to greater risks than trading in the United States. In the case of trading on non-U.S. exchanges, the Registrant will be subject to the risk of the bankruptcy or other inability of, or refusal by, such member or the counterparty to perform with respect to such transactions. Any such failure could subject the Registrant to substantial losses or substantial reductions of the profits they might otherwise have realized. The Registrant also may not have the same access to certain trades as do various other participants in non-U.S. markets.
| (19) | Members could incur substantial losses from trading in Foreign Markets by the Registrant to which such Members would not have been subject had the Trading Advisors limited their trading to U.S. markets |
Furthermore, because the Registrant will make Net Asset Value determinations in U.S. dollars, with respect to trading on Foreign Markets, the Registrant will be subject to the risk of fluctuation in the exchange rate between the local currency and dollars and to the possibility of exchange controls. Unless the Registrant hedges itself against fluctuations in exchange rates between the U.S. dollar and the currencies in which trading is done on such Foreign Markets, any profits which the Registrant might realize in such trading could be eliminated as a result of adverse changes in exchange rates and the Registrant could even incur losses as a result of any such changes.
Although the CFTC is prohibited by statute from promulgating rules which govern in any respect any rule, contract term, or action of any foreign futures exchange, the CFTC has adopted regulations to regulate the sale of foreign futures contracts and foreign options within the United States. These regulations may restrict the Registrant’s access to Foreign Markets by limiting the activities of certain participants in such markets with whom the Registrant could otherwise have traded.
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On an annual basis, each of the below programs traded approximately the following percentage of assets on foreign exchanges:
| Trading
Advisor/ Program |
Approximate Percentage/ Range |
CTA Choice KEY: Key Trends Program |
10% |
CTA Choice ISAT: Singularity Program |
25-35% |
The above ranges are only approximations with respect to each program. Actual percentages may be either lesser or greater than above-listed. Past performance is not necessarily indicative of future results.
| (20) | Failure or Lack of Segregation of Assets May Increase Losses |
The Registrant is subject to the risk of insolvency of an exchange, clearing house, commodity broker, and counterparties with whom the Trading Advisors trade. The Registrant’s assets could be lost or impounded in such an insolvency during lengthy bankruptcy proceedings. Were a substantial portion of the Registrant’s capital tied up in a bankruptcy, the Managing Member might suspend or limit trading, perhaps causing the Registrant to miss significant profit opportunities. The Registrant is subject to the risk of the inability or refusal to perform on the part of the counterparties with whom contracts are traded.
The Commodity Exchange Act (“CEA”) requires a futures commission merchant (“FCM”) or clearing broker, to segregate all funds received from customers from such broker’s proprietary assets. If the clearing brokers fail to do so, the assets of the Registrant might not be fully protected in the event of their bankruptcy. Furthermore, in the event of a clearing broker’s bankruptcy, the Registrant could be limited to recovering only a pro rata share of all available funds segregated on behalf of such clearing broker’s combined customer accounts, even though certain property specifically traceable to the Registrant (for example, Treasury bills deposited by the Registrant with the clearing broker as margin) was held by such clearing broker. The clearing brokers have been the subject of certain regulatory and private causes of action.
In the event of an FCM’s bankruptcy, the Registrant may recover a pro-rata share or none of its assets.
With respect to transactions the Registrant enters into that are not traded on an exchange, there are no daily settlements of variations in value and there is no requirement to segregate funds held with respect to such accounts. Thus, the funds the Registrant invests in such transactions may not have the same protections as funds used as margin or to guarantee exchange-traded futures and options contracts. If the counterparty becomes insolvent and the Registrant has a claim for amounts deposited or profits earned on transactions with the counterparty, the Registrant’s claim may not receive a priority. Without a priority, the Registrant is a general creditor and its claim will be paid, along with the claims of other general creditors, from any monies still available after priority claims are paid. Even funds of the Registrant that the counterparty keeps separate from its own operating funds may not be safe from the claims of other general and priority creditors. There are no limitations on the amount of allocated assets a portfolio manager can trade on foreign exchanges or in forward contracts.
| (21) | New Futures Contracts |
Only those futures designated by the CFTC may be traded on U.S. futures exchanges. Periodically, additional futures contracts may be designated as approved futures contracts by the CFTC or other foreign regulatory authorities. The Trading Advisors may determine that it is appropriate to trade in such new futures contracts on behalf of the Registrant. Because such futures contracts will be new, there can be no assurance that the trading strategies of the Trading Advisors will be applicable to any new futures contracts in which such Trading Advisors choose to trade. The markets in new futures contracts, moreover, have been historically both illiquid and highly volatile for some period of time after the contract begins trading. This presents both significant profit potential and a corresponding high risk potential.
| (22) | Exchanges for Physicals |
The Trading Advisors may engage in exchanges for physicals. The CFTC and certain exchanges have from time to time examined the propriety of transactions involving exchanges for physicals. If a Trading Advisor engaging in exchanges of futures for physicals was prevented from such trading as a result of regulatory changes, the performance of client accounts of such Trading Advisor, including the Registrant, could be adversely affected.
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Risks Related to Trading Forward Contracts, Foreign Exchange Contracts, Options and Derivatives
| (23) | Foreign Exchange Currency Trading is Not Subject to CFTC Regulation |
Certain Trading Advisors may trade their programs by entering into spot and forward transactions involving currencies with United States and foreign banks (referred to as the “interbank market”) and currency dealers. Certain other Trading Advisors may enter into such transactions for hedging purposes. As with the risks involved in forward contracts (see above), trading in spot and forward foreign exchange transactions is not regulated by the CFTC and such contracts are not traded on or guaranteed by an exchange or its clearing house.
Certain other Trading Advisors may trade foreign exchange through futures or exchange for physicals. Such transactions are regulated by the CFTC and are traded on and guaranteed by an exchange.
| (24) | Options Trading |
Certain of the Trading Advisors’ trading will include the trading of options contracts, including the trading of options on futures contracts, physical commodities and securities (“Underlying Interests”). Such options trading may take place on U.S. and foreign exchanges. Although successful options trading requires many of the same skills as successful futures trading, the risks involved are somewhat different. For example, the assessment of near-term market volatility - which is directly reflected in the price of outstanding options - can be of much greater significance in trading options than it is in many long-term futures strategies. If market volatility is incorrectly predicted, the use of options can be extremely expensive.
Certain Trading Advisors may trade options on futures. Options on futures contract gains and losses are marked-to-market daily for purposes of determining margin requirements. Option positions will require additional margin if the market moves against the position. Due to these differences in margin treatment between futures and options, there may be periods in which positions on both sides must be closed down prematurely due to short-term cash flow needs. If this occurs during an adverse move in a spread or straddle relationship, then a substantial loss could occur.
The ability to trade or exercise options may be restricted in the event that trading in the underlying investment becomes restricted. Options trading on U.S. futures exchanges is subject to regulation by both the CFTC and such exchanges. Options trading on foreign exchanges is not regulated by the CFTC.
| (25) | Swaps |
Swaps are not traded on exchanges and are not subject to the same type of government regulation as exchange markets. As a result, many of the protections afforded to participants on organized exchanges and in a regulated environment are not available in connection with these transactions.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) will affect the manner in which OTC swap transactions are traded and the credit risk associated with such trading. Any changes will likely impact the way swaps are traded and could impact the trading strategy of the Registrant, as well as make it more expensive to trade swaps.
There are no limitations on daily price movements in swaps. Speculative position limits are not applicable to swaps, although the counterparties to swaps may limit the size or duration of positions as a consequence of credit considerations. Participants in the swap markets are not required to make continuous markets in the swaps they trade. Participants could refuse to quote prices for swaps or quote prices with an unusually wide spread between the price at which they are prepared to buy and the price at which they are prepared to sell. In the case of any swap that references a fund or program managed by a Trading Advisor, certain or all of the risks disclosed in this report in relation to the Trading Advisors also may apply, indirectly, to the Registrant’s investment in such swap.
| (26) | Derivative Instruments in General |
The Trading Advisors may use various derivative instruments, including futures, options, forward contracts, swaps (including asset swaps, total return swaps and credit default swaps) and other derivatives (including credit derivatives and synthetic securities) that may be volatile and speculative. Certain positions may be subject to wide and sudden fluctuations in market-value, with a resulting fluctuation in the amount of profits and losses. Use of derivative instruments presents various risks, including the following:
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(i) Tracking - When used for hedging purposes, an imperfect or variable degree of correlation between price movements of the derivative instrument and the underlying investment sought to be hedged may prevent the Trading Advisor from achieving the intended hedging effect or expose the Registrant to the risk of loss.
(ii) Liquidity - Derivative instruments, especially when traded in large amounts, may not be liquid in all circumstances, so that in volatile markets the Trading Advisor may not be able to close out a position without incurring a loss.
(iii) Leverage - Trading in derivative instruments can result in large amounts of leverage. Thus, the leverage offered by trading in derivative instruments may magnify the gains and losses experienced by the Registrant and could cause its Net Asset Value to be subject to wider fluctuations than would be the case if the Trading Advisor did not use the leverage feature in derivative instruments.
There is no guarantee that the counterparty to a derivatives transaction will perform, or that it has accurately represented its creditworthiness. Trading in derivatives may subject the Registrant to additional legal risks, operations risks and valuation risks.
| (27) | Over-the-Counter Trading |
A portion of the Registrant’s assets may indirectly be used to trade OTC derivative contracts, such as forward contracts, option contracts, or swaps, or spot contracts. OTC contracts are typically traded on a principal-to-principal basis through dealer markets that are dominated by major money center and investment banks and other institutions and are essentially unregulated by the CFTC. You therefore do not receive the protection of CFTC regulation or the statutory scheme of the CEA in connection with this trading activity. The markets for OTC contracts rely upon the integrity of market participants in lieu of the additional regulation imposed by the CFTC on participants in the futures markets. The lack of regulation in these markets could expose the Registrant in certain circumstances to significant losses in the event of trading abuses or financial failure by participants.
The Registrant also faces the risk of non-performance by the counterparties to the OTC contracts. Unlike in futures contracts, the counterparty to these contracts is generally a single bank or other financial institution, rather than a clearing organization backed by a group of financial institutions. As a result, there will be greater counterparty credit risk in these transactions. The clearing member, clearing organization or other counterparty may not be able to meet its obligations, in which case the Registrant could suffer significant losses on these contracts.
The Dodd-Frank Act will affect the manner in which OTC swap transactions are traded and the credit risk associated with such trading. Depending upon actions taken by regulatory authorities, these changes may also affect the manner of trading of OTC foreign currency transactions.
The percentage of the Registrant’s positions that are expected to constitute forward currency contracts can vary substantially from month to month.
Each of the programs trade approximately the following percentages in the OTC trading:
| Investee
Pool/ Program |
Percentage/ Range |
CTA Choice KEY: |
<10% |
CTA Choice ISAT: |
<10% |
| (28) | Possible Illiquid Markets May Exacerbate Losses |
Futures and forward positions cannot always be liquidated at the desired price. It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. A market disruption, such as when foreign governments may take or be subject to political actions which disrupt the markets in their currency or major exports, can also make it difficult to liquidate a position. Periods of illiquidity and the events that trigger them are difficult to predict and there can be no assurance that any Trading Advisor will be able to do so.
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There can be no assurance that market illiquidity will not cause losses for the Registrant. The large size of the positions which a Trading Advisor is expected to acquire for the Registrant increases the risk of illiquidity by both making its positions more difficult to liquidate and increasing the losses incurred while trying to do so.
The risk of loss due to potentially illiquid markets is more acute in respect of OTC instruments than in respect of exchange-traded instruments because the performance of those contracts is not guaranteed by an exchange or clearing house and the Registrant will be at risk to the ability of the counterparty to the instrument to perform its obligations thereunder. Because these markets are not regulated, there are no specific standards or regulatory supervision of trade pricing and other trading activities that occur in those markets.
| (29) | Possible Default and Counterparty Risk |
Certain of the markets in which the Trading Advisors will effect transactions are OTC or “interdealer” markets. Foreign exchange transactions, forward contracts, swaps, derivative or synthetic instruments or other OTC transactions are not regulated by the CEA and dealers are not obligated to segregate customer assets. As a result, Members do not have such basic protections with respect to the trading in such OTC investments by the Registrant. This lack of regulation in these markets could expose the Registrant in certain circumstances to significant losses in the event of trading abuses or financial failure by the counterparties.
Such OTC trading may expose the Registrant to credit risk with regard to parties with which it trades and the risk of settlement default. Unlike exchange-traded transactions that generally are backed by clearing organization guarantees, daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries, the participants in OTC transaction are typically not subject to credit evaluation and regulatory oversight as are members of “exchange based” markets. This exposes the Registrant to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the Registrant to suffer a loss. In addition, in the case of a default of a counterparty, the Registrant could become subject to adverse market movements while replacement transactions are executed. Such “counterparty risk” is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the Registrant has concentrated its transactions with a single or small group of counterparties. The Registrant may not have an internal credit function that evaluates the creditworthiness of their counterparties. The ability of the Registrant to transact business with any one or number of counterparties, the lack of any meaningful and independent evaluation of such counterparties’ financial capabilities and the absence of a regulated market to facilitate settlement may increase the potential for losses by the Registrant.
Other Investment-Related Risks
| (30) | Investment of Non-Margin Assets May Increase Risks to the Registrant |
The Managing Member may invest certain non-margin assets (directly or indirectly through investment funds) in certain securities permitted by applicable rules and regulations. While such investments may increase interest income, and although the types of securities that may be invested in are limited by CFTC regulations, investment in such securities may be riskier than having 100% of the proceeds of the offering of the Interests deposited in cash in segregated accounts in the name of the Registrant at the clearing brokers or another eligible financial institution. The returns on the investment of non-margin assets may be lower than anticipated, which would cause the cost of investment in the Interests to increase.
| (31) | Increased Costs of Frequent Trading |
Each Trading Advisor will make certain trading decisions on the basis of short-term market considerations. The portfolio turnover rate may be substantial at times, either due to such decisions or to market conditions and result in one or more series incurring substantial brokerage commissions and other transaction fees and expenses. Therefore, portfolio turnover and brokerage commission expenses may significantly exceed those of other investment entities of comparable size, and affect the Registrant’s earnings.
| (32) | Suspensions of Trading |
The futures, options on futures and security futures markets are subject to comprehensive statutes, regulations and margin requirements. With respect to traditional futures exchanges, the CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily limits and the suspension of trading. The regulation of commodity interest transactions in the United States is a rapidly changing area of law and is subject to ongoing modification by governmental and judicial action. In addition, various national governments have expressed concern regarding the disruptive effects of speculative trading in the currency markets and the need to regulate the derivatives markets in general. The effect of any future regulatory change is impossible to predict, but could be substantial and adverse. Also, exchanges typically have the right to suspend or limit trading in any instrument traded on the exchange. Any suspension could render it impossible to liquidate positions and thereby expose the Registrant to losses.
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| (33) | Currency and Exchange Rate Risks |
Since certain of the Trading Advisors may invest in investments denominated or quoted in currencies other than the U.S. Dollar, changes in currency exchange rates may affect the value of the Registrant’s investments and the unrealized appreciation or depreciation of such investments. Among the factors that may affect currency value are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments. A Trading Advisor may seek to protect the value of some portion or all of its portfolio holdings in the Registrant against currency risks by engaging in hedging transactions, if available, cost-effective and practicable. The Registrant may enter into forward contracts on currencies, enter into swaps, purchase put and call options on currencies, or engage in any combination of the foregoing. There is no certainty that such strategies will be effective. Moreover, there is no certainty that instruments suitable for hedging currency shifts will be available at the time when the Registrant wishes to use them or that, even if available, the Registrant will elect to utilize a hedging strategy.
Since OTC instruments are not guaranteed by an exchange or clearing house, a default on such an instrument would deprive a Trading Advisor of unrealized profits or force a Trading Advisor to cover its commitments for purchase or resale, if any, at the current market price. Lastly, the Registrant is not responsible for the effects that fluctuations in the value of currencies other than the dollar may have on subscription amounts to the Registrant or redemption proceeds paid to a Member that has requested the redemption of part or all of his, her or its Interest in the Registrant.
| (34) | Valuation of Investments |
While pricing information is generally available for investments in which the Registrant may invest, there is currently no centralized source for pricing information for certain non-exchanged-traded investments, and reliable pricing information may not be available from any source at times. Prices quoted by different sources are subject to material variation. For purposes of calculating the Registrant’s net capital appreciation and net capital depreciation and valuing investments, valuations of investments for which pricing information cannot be obtained will be made by the Registrant’s administrator based upon such information as is available, including the advice of a Trading Advisor.
| (35) | Strategy-Specific Risks |
One or more of the Trading Advisors may from time to time cause the Registrant to hold a few, relatively large positions in relation to its assets. Consequently, a loss in any such position could result in a proportionately greater loss to the Registrant than if the Registrant’s assets had been spread among a wider number of instruments. Strategy risk may arise in the event of the failure or deterioration of an entire strategy such that one or more Trading Advisors employing that strategy suffer significant losses. Losses may arise if Trading Advisors are unable to hedge such risks or respond to market conditions in a timely manner.
| (36) | Trading Facilities and Electronic Trading |
Most open-outcry and electronic trading facilities are supported by computer-based component systems for the order-routing, execution, matching, registration and clearing of trades. As with all facilities and systems, they are vulnerable to disruption or failure. The Registrant’s ability to recover losses may be subject to limits on liability imposed by the system provider, the market, the clearing house and/or Member firms.
Trading on an electronic system may differ not only from trading in an open-outcry market but also from trading on other electronic systems. If a Trading Advisor undertakes transactions on an electronic trading system on behalf of the Registrant, the Registrant will be exposed to risks associated with the system including the failure of hardware and software. The result of any system failure may be that the Trading Advisor’s order is either not executed according to its instructions or it is not executed at all.
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| (37) | Trading Advisors Trading Independently of Each Other May Reduce Profit Potential and Insurance Risks through Offsetting Positions |
The Trading Advisors trade entirely independently of each other. Trading Advisors may, from time to time, take opposite positions, eliminating any possibility that a Member may profit from these positions considered as a whole but incurring the usual expenses associated with taking such positions. The Trading Advisors’ programs may, at times, be similar to one another thereby negating the benefits of investing in more than one Trading Advisor by purchasing Interests, which may, in fact, increase risk. Two or more Trading Advisors may compete with each other to acquire the same position, thereby increasing the costs incurred by each of them to take such position. It is also possible that two or more Trading Advisors, although trading independently, could experience draw-downs at the same time, thereby negating the potential benefit associated with exposure to more than one Trading Advisor and more than one program. The Registrant’s multi-advisor structure will not necessarily control the risk of speculative futures or forward trading. Multi-advisor funds may have significant volatility and risk despite being relatively diversified among trading advisors.
| (38) | Deleveraging of the Financial Markets |
One of the primary consequences of the market disruptions of 2008 and 2009 has been the forced deleveraging of numerous financial instruments, including private investment funds, in a process which is ongoing. Not only are substantial losses being incurred in the deleveraging process, but also the available opportunities in the markets in which Trading Advisors trade may be reduced on a long-term basis as a result.
| (39) | Assets Held in Accounts At U.S. Banks May Not be Fully Insured |
The assets of the Registrant that are deposited with commodity brokers or their affiliates may be placed in deposit accounts at U.S. banks. The Federal Deposit Insurance Corporation (“FDIC”) insures deposits held at insured depository institutions for up to $250,000 (including principal and accrued interest) for each insurable capacity (e.g., individual accounts, joint accounts, corporate accounts, etc.), though deposits in separate branches of an insured institution are not separately insured. If the FDIC were to become receiver of U.S. bank holding deposit accounts that were established by a commodity broker or one of its affiliates, then it is uncertain whether the commodity broker, the affiliate involved, the Registrant, or the Member would be able to reclaim cash in the deposit accounts above $250,000.
| (40) | Repurchase and Reverse Repurchase Agreements |
The Trading Advisors may engage in repurchase and reverse repurchase agreements. In the case of default by the transferee of a security in a reverse repurchase agreement, the transferor runs the risk that the transferee may not deliver the security when required. In the event of the bankruptcy or other default of a transferor of a security in a repurchase agreement, the transferee could experience both delays in liquidating the underlying security and losses, including: (a) a possible decline in the value of the collateral during the period while the transferee seeks to enforce its rights thereto; (b) possible subnormal levels of income and lack of access to income during this period; and (c) expenses of enforcing its rights.
Risks Related to the Managing Member and the Trading Advisors
| (41) | Managing Member |
The Managing Member has complete discretion in allocating the Registrant’s assets to Trading Advisors. The Registrant’s success depends on the Managing Member’s ability and the ability of its Investment Committee, to select Trading Advisors and allocate assets. If the Registrant lost the services of the Managing Member or its Investment Committee, it might have to be terminated by way of compulsory redemption of all issued and outstanding Interests in the Registrant. In addition, the Managing Member and its principals and employees will devote such time as they deem necessary for the efficient investment activities of the Registrant. However, the Managing Member and its principals and employees will be involved, from time to time, with other investment management activities and will not devote all of their time specifically to the Registrant’s business.
| (42) | Reliance on the Trading Advisors |
To the exclusion of the Members and the Managing Member, each Trading Advisor is responsible for making all futures, forwards, and options trading decisions on behalf of the assets allocated to it by the Registrant. The Managing Member has no control over the specific trades the Trading Advisors may make, leverage used, risks or concentrations assumed or whether the Trading Advisors will act in accordance with the disclosure documents or descriptive materials furnished by them to the Managing Member. The Managing Member can provide no assurance that the trading programs employed by the Trading Advisors will be successful. Therefore, as an investor in the Registrant, Members will be relying almost exclusively on the judgment and ability of the Trading Advisors to invest the Registrant’s assets.
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| (43) | Limited Knowledge about Trading Advisors |
Although the Managing Member will investigate, or cause the investigation of, the Trading Advisors with which the Registrant will invest, in general, due to the confidential and/or proprietary nature of most of the information, the Managing Member is relying on each Trading Advisor for the accuracy thereof. Accordingly, neither the Registrant nor the Managing Member can make any representation regarding the completeness, accuracy or adequacy of such information. Additionally, because of the proprietary nature of each Trading Advisor’s trading program, you generally will not be advised if adjustments are made to a trading program in order to accommodate additional assets under management or for any other reason.
| (44) | Trading Advisors’ Businesses Dependent on Key Individuals |
Trading decisions made by each Trading Advisor may be based on the judgment of one or a limited number of key individuals (each, a “Key Man”). If any Key Man were to die or become incapacitated or otherwise terminate his relationship with a Trading Advisor, such event could have a material adverse effect on the Registrant and its performance.
| (45) | New Trading Advisors |
The Managing Member may terminate, substitute or retain Trading Advisors on behalf of the Registrant in its sole discretion. The addition of a new Trading Advisor and/or the removal of one of the current Trading Advisors may cause disruptions in trading as assets are reallocated and new Trading Advisors transition over, which may have an adverse effect on the Net Asset Value of the Registrant. The Managing Member will actively manage the Registrant’s investment portfolio, which may result in frequently changing either the composition of the portfolio or the allocation of the Registrant’s assets among the Trading Advisors comprising the Registrant’s investments. A Trading Advisor generally is required to recoup previous trading losses before it can earn performance-based compensation. However, the Managing Member may elect to replace a Trading Advisor that has a “loss carryforward.” In that case, the Registrant would lose the “free ride” of any potential recoupment of the prior losses of such Trading Advisor. In addition, the new Trading Advisor would earn performance-based compensation on the first dollars of investment profits.
It is also possible that (i) the advisory agreement with any Trading Advisor, once it expires, will not be renewed on the same terms as the current advisory agreement for that Trading Advisor, (ii) if assets of the Registrant allocated to a particular Trading Advisor are reallocated to a new or different Trading Advisor, the new or different Trading Advisor may not manage the assets on terms as favorable to the Registrant as those negotiated with the previous Trading Advisor, (iii) the addition of a new Trading Advisor and/or the removal of one of the current Trading Advisors may cause disruptions in trading as assets are reallocated or (iv) the services of a replacement Trading Advisor may not be available. There is severe competition for the services of qualified Trading Advisors, and the Managing Member may not be able to retain replacement or additional Trading Advisors on acceptable terms. The effect of the replacement of or the reallocation of assets away from a Trading Advisor therefore, could be significant.
| (46) | Trading Advisor Restrictions |
There are a number of Trading Advisors whose services are not generally available to the investing public. These Trading Advisors generally place stringent restrictions on the number of persons whose money they will manage. As a result, certain Trading Advisors to which the Managing Member would like to allocate Registrant assets may limit, or not be able to accept any, allocation of Registrant assets. This could adversely affect the Registrant’s investment strategy and, consequently, its returns.
Moreover, there may be times when the Registrant will allocate assets with respect to a particular Trading Advisor in a different manner than another fund or account managed by the Managing Member or its affiliates. For instance, to satisfy redemption requests, the Managing Member may withdraw Registrant’s assets from one Trading Advisor while a fund operated by an affiliate of the Managing Member may be allocating additional assets to that same Trading Advisor. Consequently, the Registrant could incur losses or lose out on certain gains from which other affiliated funds or accounts may benefit.
In addition, Trading Advisors may have restrictions in their governing documents (e.g., articles of association or partnership agreements) that limit the Registrant’s ability to withdraw funds from or invest with the relevant Trading Advisor, other than at specified times such as the end of the year. The Managing Member’s ability to withdraw funds from or invest funds with a particular Trading Advisor with such restrictions will be limited and such restrictions will limit the Managing Member’s flexibility to reallocate such assets among Trading Advisors.
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| (47) | Registrant Trading is Not Transparent |
The trading decisions in respect of the Registrant are made by one or more Trading Advisors. While the Managing Member receives daily trade confirmations from the clearing broker and foreign exchange dealers, such information is not provided to Members and the Registrant’s trading results are reported to the Members monthly. Accordingly, an investment in the Registrant does not offer you the same transparency, i.e., an ability to review all investment positions daily, that a personal trading account offers. The Managing Member may (but is under no obligation to) provide estimated daily or weekly values to Members.
| (48) | Incentive Fee Agreements with Trading Advisors |
The Managing Member pays each Trading Advisor incentive fees based on the trading profits earned by it for the assets of the Registrant that such Trading Advisor manages, including unrealized appreciation on open positions. Accordingly, it is possible that the Managing Member will pay an incentive fee on trading profits that do not become realized. Also, because the Trading Advisors are compensated based on the trading profits earned, each of the Trading Advisors has a financial incentive to make investments that are riskier than might be made if the Registrant’s assets were managed by a Trading Advisor that did not receive performance-based compensation. Also, such incentive or performance based payments may be paid to Trading Advisors who show net profits, even though the Registrant, as a whole, incurs a net loss.
| (49) | Possible Adverse Effects of Increasing the Assets Managed by the Trading Advisors |
We believe that none of the Trading Advisors intend to limit the amount of additional equity that they may manage, and each will continue to seek major new accounts. However, the rates of returns achieved by a Trading Advisor often diminish as the assets under its management increase. This can occur for many reasons, including the inability of the Trading Advisor to execute larger position sizes at desired prices and because of the need to adjust the Trading Advisor’s trading program to avoid exceeding speculative position limits. These limits are established by the CFTC and the exchanges on the number of speculative futures and options contracts in a commodity that one trader may own or control. Furthermore, if the Trading Advisors for the Registrant cannot manage any additional allocation from the Registrant, the Managing Member may add additional Trading Advisors for the Registrant who may have less experience or less favorable performance than the existing Trading Advisors.
| (50) | Each Trading Advisor Advises Other Clients and may Achieve More Favorable Results for its Other Accounts |
Each of the Trading Advisors currently manages other trading accounts, and each will remain free to manage additional accounts, including its own accounts, in the future. A Trading Advisor may vary the trading strategies applicable to the Registrant from those used for its other managed accounts, or its other managed accounts may impose a different cost structure than that of the Registrant. Consequently, the results any Trading Advisor achieves for the Registrant may not be similar to those achieved for other accounts managed by the Trading Advisor or its affiliates at the same time. Moreover, it is possible that those other accounts managed by the Trading Advisor or its affiliates may compete with the Registrant for the same or similar positions in the commodity interest markets and that those other accounts may make trades at better prices than the Registrant.
A Trading Advisor may also have a financial incentive to favor other accounts because the compensation received from those other accounts exceeds, or may in the future exceed, the compensation that it receives from managing the account of the Registrant. Because records with respect to other accounts are not accessible to Members, Members will not be able to determine if any Trading Advisor is favoring other accounts.
| (51) | Risks of Investing in CTA Funds |
The Registrant and CTA Choice, as independent legal entities, are subject to lawsuits or proceedings by government entities or private parties. Expenses or liabilities of the Registrant or CTA Fund arising from any such suit would be borne by the Registrant or such CTA Fund. The operating agreement of CTA Choice, the advisory agreements with the Trading Advisors, and the various service provider agreements provide for indemnification of Clarity, the Trading Advisors, and the service providers out of the assets of the applicable CTA Fund. In the event that any indemnification is provided pursuant to any of these agreements, the assets of the relevant CTA Fund could be reduced or depleted and, consequently, investors in the CTA Fund (such as the Registrant) could be adversely affected. Although the Managing Member attempts to monitor the performance of each CTA Fund, the Registrant must ultimately rely on (a) the Trading Advisor to operate in accordance with the investment strategy or the guidelines laid out in the CTA Fund documents; and (b) the accuracy of the information provided to the Registrant by the CTA Fund. If the Trading Advisor to a CTA Fund does not operate in accordance with the investment strategy or guidelines specified for such CTA Fund, or if the information furnished by a CTA Fund is not accurate, the Registrant might sustain losses with respect to its investment with such CTA Fund despite the Managing Member’s attempts to monitor CTA Fund.
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| (52) | Multiple Series |
Pursuant to the Delaware Limited Liability Company Act, as amended (the “DLLC Act”), CTA Choice is divided into separate series. The DLLC Act provides that, if certain requirements of the DLLC Act are satisfied, the debts, liabilities and obligations relating to a particular series are enforceable only against the assets of that series and not against the assets of the limited liability company generally or the assets of any other series. Although the provisions of the DLLC Act providing for the ability to establish designated series were enacted in 1996, there is a dearth of case law interpreting those provisions. Further, CTA Choice may operate or have assets held on its behalf or be subject to claims in other jurisdictions which may not necessarily recognize the legal segregation of the CTA Funds. Finally, other contractual arrangements entered into by CTA Choice or by a CTA Fund may have the effect of defeating the segregation protections of the DLLC Act. Accordingly, the degree of separation that any CTA Fund enjoys from the debts, liabilities and obligations of other CTA Funds is not certain. CTA Choice intends that the assets of each CTA Fund will be structured to comply with the DLLC Act and that CTA Choice will be operated with the assets of each CTA Fund segregated on the books and records of CTA Choice so that the assets of one CTA Fund are not subject to the liabilities of any other CTA Fund; however, there is no assurance that this structure and operation will be respected in all circumstances and in all jurisdictions.
| (53) | No Control over CTA Funds |
The Managing Member will have no control over the investments made by a CTA Fund and the investments they trade (including determining the creditworthiness of counterparties with which, and the exchanges on which, such CTA Fund trades) or the leverage utilized or the risks assumed by such CTA Fund. In addition, a CTA Fund may impose certain limitations on the Registrant’s ability to redeem its investment with such CTA Fund. This in turn may adversely affect the ability of the Registrant to pay redemptions, and may require the Registrant to temporarily suspend redemptions. Additionally, the Trading Advisor for each CTA Fund will make the commodity trading decisions for that CTA Fund. Therefore, the success of each CTA Fund largely depends on the judgment and ability of the Trading Advisors. A Trading Advisor’s trading for any CTA Fund may not prove successful under all or any market conditions. If a Trading Advisor’s trading is unsuccessful, the applicable CTA Fund may incur losses.
It may be difficult, if not impossible, for the Managing Member to protect the Registrant from the risk of a Trading Advisor’s fraud, misrepresentation or material strategy alteration. In addition, the Managing Member will have no control over the counterparties with which a CTA Fund effects transactions.
| (54) | Lack of Liquidity of CTA Fund Assets |
CTA Fund assets may, from time to time, consist of securities or other financial instruments or obligations which are thinly traded or for which no market exists or which are restricted as to their transferability under federal or state securities laws. The sale of any such investments may be possible only at substantial discounts. Further, such investments may be extremely difficult to value with any degree of certainty.
Risks Related to the Registrant’s Structure
| (55) | Limited Liquidity and Transferability of Interests |
An investment in the Registrant involves limited liquidity and the Interests are not freely transferable. There is no secondary market for the Interests and none is expected to develop. While the Interests may be redeemed, there are restrictions, and fees may be assessed. For example, Interests may be redeemed only as of each Valuation Day provided a Request for Redemption is received at least five business days prior to the end of such month excluding the last business day of the month.
Transfers of Interests are subject to limitations, such as 30 days’ advance notice of any intent to transfer. Also, the Managing Member may deny a request to transfer if it determines that the transfer may result in adverse legal or tax consequences for the Registrant.
Members thus may not be able to liquidate their investment in the event of an emergency or for any other reason, and Interests may not be readily accepted as collateral for a loan.
| (56) | Limited Ability to Liquidate Investments in CTA Funds |
There is no public market for an investment in a CTA Fund made by the Registrant. Such investments cannot be transferred, assigned, pledged or encumbered except on the terms and conditions set forth in the organizational documents of the CTA Fund. Although the Registrant has the right to redeem such interests as provided in the CTA Choice organizational documents, such rights are restricted as provided therein.
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| (57) | Compulsory Redemption |
The Managing Member, in its sole discretion, upon 48 hours’ prior written notice to a Member, may compel redemption of any or all of a Member’s Interests for any reason.
| (58) | Determination of Net Profit and Loss |
In order to determine net profits and losses, the investment positions and other assets held by the Registrant must be valued. In valuing the Registrant’s assets, the Administrator will receive input from third parties (including pricing services, data providers, Brokers and Clarity) and generally will rely on such information in determining valuations. The Managing Member will review all valuations and calculations with the Administrator in accordance with the Registrant’s valuation policies and procedures. Should these valuations prove to be incorrect, the Registrant may experience losses.
| (59) | Adjustments |
The Registrant will permit redemptions to be made and subscriptions to be accepted at times other than at the end of a Fiscal Year. At any such time, an interim closing effectively will occur on the basis of unaudited financial statements. Because there may be a greater risk of error when unaudited financial statements are used, Individual Members may be adversely affected by errors, if any, in such unaudited financial statements. The Managing Member is authorized to make an adjustment in the determination of net profit or net loss if the Managing Member, in good faith, considers such adjustment to be necessary and equitable to correct material errors in unaudited financial information. However, the Managing Member may not be aware of an error before a Member redeems its Interest, and there may be other limitations on the Managing Member’s ability to make any adjustment.
| (60) | Reserve for Contingent Liabilities |
Under certain circumstances, the Registrant may find it necessary to set up a reserve for contingent liabilities. If that occurs, this may be taken into account in the calculation of Net Asset Value, and the Registrant may withhold a certain portion of your redemption amount. Similar provisions may be contained in the governing instruments for Trading Advisors. This could occur, for example, (i) if some of the positions of the Registrant were illiquid, (ii) if there are any assets which cannot be properly valued on the redemption date, or (iii) if there is any pending transaction or claim by or against the Registrant or the Trading Advisor involving or which may affect your book capital account or your obligations.
| (61) | Various Actual and Potential Conflicts of Interest May Be Detrimental to Members |
The Registrant is subject to actual and potential conflicts of interests involving the Managing Member, the Trading Advisors and various brokers. The Managing Member, the Trading Advisors, and their respective principals, all of which are engaged in other investment activities, are not required to devote substantially all of their time to the Registrant’s business, which also presents the potential for numerous conflicts of interest with the Registrant. As a result of these and other relationships, parties involved with the Registrant have a financial incentive to act in a manner other than in the best interests of the Registrant and its Members. The Managing Member has not established any formal procedure to resolve conflicts of interest. Consequently, Members will be dependent on the good faith of the respective parties subject to such conflicts to resolve them equitably.
The Registrant may be subject to certain conflicts with respect to its clearing brokers, its futures brokers, and any executing broker including, but not limited to, conflicts that result from receiving greater amounts of compensation from other clients, purchasing opposite or competing positions on behalf of third party accounts traded through the clearing broker, the futures broker and executing brokers.
| (62) | Substantial Redemptions |
In the event that there are substantial redemptions from the Registrant, it may be more difficult for the Registrant to generate the same level of profits operating on a smaller capital base. Under such circumstances, in order to provide sufficient funds to pay redemptions, the Managing Member might be required to cause the Trading Advisors to liquidate positions more rapidly than otherwise desirable. Illiquidity in the markets could make it difficult to liquidate positions on favorable terms, which could result in additional losses.
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| (63) | Possibility of Termination of the Registrant Before Expiration of its Stated Term |
The Managing Member may withdraw from the Registrant upon 120 days’ notice, which would cause the Registrant to terminate unless a substitute managing member was obtained. Other events, such as a long-term substantial loss suffered by the Registrant, could also cause the Registrant to terminate before the expiration of its stated term. This could cause you to liquidate your investments and upset the overall maturity and timing of your investment portfolio. If the registrations with the CFTC or memberships in the NFA of the Managing Member or the clearing broker were revoked or suspended, such entity would no longer be able to provide services to the Registrant.
| (64) | Need for Risk Controls and Compliance Procedures |
Events during the past years, including bankruptcy and other adverse financial results of major financial institutions, have focused attention upon the necessity for firms to maintain adequate risk controls and compliance procedures. There is no assurance that the Registrant’s controls and procedures will be adequate. These events have also raised concerns as to the manner in which certain exchanges monitor trading activities and implement regulations to protect customer funds.
| (65) | No Representation or Other Independent Experts |
The Managing Member has consulted with counsel, accountants and other experts regarding the formation and operation of the Registrant and this offering. The Registrant’s legal counsel does not represent prospective Members in connection with this offering. Prospective Members are advised to consult their own independent counsel with respect to the legal and tax implications of an investment in Interests.
Regulatory and Other Risks
| (66) | Federal Agencies, Including the SEC and the CFTC, Regulate Certain Activities of the Registrant |
Regulatory changes could adversely affect the Registrant by restricting its trading activities and/or increasing the costs or taxes to which the Members are subject. The Dodd-Frank Act, among other things, grants the CFTC and SEC broad rulemaking authority to implement various provisions of the Dodd-Frank Act, including comprehensive regulation of the over-the-counter derivatives market and certain foreign exchange transactions. The implementation of the Dodd-Frank Act could adversely affect the Registrant by increasing transaction and/or regulatory compliance costs. In addition, greater regulatory scrutiny may increase the Registrant’s and the Managing Member’s exposure to potential liabilities. Increased regulatory oversight can also impose administrative burdens on the Managing Member, including, without limitation, responding to investigations and implementing new policies and procedures. As a result, the Managing Member’s time, attention and resources may be diverted from portfolio management activities.
Other potentially adverse regulatory initiatives could develop suddenly and without notice.
| (67) | CFTC Registrations could be Terminated which could Adversely Affect the Registrant |
If the Commodity Exchange Act registrations or NFA memberships of the Managing Member or the registered Trading Advisors were no longer effective, these entities would not be able to act for the Registrant, which could adversely affect the Registrant.
| (68) | Possible Effects of Speculative Position Limits |
The CFTC and/or U.S. exchanges have established “speculative position limits” on the maximum net long or net short position which any person or group of persons may hold or control in particular futures, options on futures and swaps that perform a significant price discovery function. Most exchanges also limit the amount of fluctuation in commodity futures contract prices on a single trading day. The trading instructions of the Trading Advisors may have to be modified, and positions held by the Registrant may have to be liquidated in order to avoid exceeding these limits. Such modification or liquidation could adversely affect the operations and profitability of the Registrant by increasing transaction costs to liquidate positions and limiting potential profits on the liquidated positions.
In October 2011, the CFTC adopted new rules governing position limits. In September 2012, these rules were vacated by the United States District Court for the District of Columbia and remanded to the CFTC for further consideration. It is possible, nevertheless, that these rules may take effect in some form via re-promulgation or a successful appeal by the CFTC of the District Court’s ruling. The vacated rules established position limits on certain futures contracts and any economically equivalent futures, options and swaps. These rules could have an adverse effect on the Trading Advisors trading for the Registrant.
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| (69) | Compliance with ERISA Restrictions |
The Managing Member intends to use reasonable efforts to cause employee benefit plans subject to ERISA and/or plans subject to Section 4975 of the Code and other “benefit plan investors”, as defined in the Plan Asset Regulation and modified by the Pension Protection Act of 2006, to hold in the aggregate less than 25% of the Interests in the Registrant and of each other class of equity interests in the Registrant. The Managing Member shall use reasonable efforts to restrict transfers or purchases of any equity interest in the Registrant so that ownership of each class of equity interests in the Registrant by benefit plan investors will remain below the 25% threshold contained in the Plan Asset Regulation. In this event, although there can be no assurance that such will be the case, the assets of the Registrant should not constitute “plan assets” for purposes of ERISA and Section 4975 of the Code.
If the assets of the Registrant were to become “plan assets” subject to ERISA and Section 4975 of the Code, certain investments made or to be made by the Registrant in the normal course of its operations might result in non-exempt prohibited transactions and might have to be rescinded. If at any time the Managing Member determines that assets of the Registrant may be deemed to be plan assets subject to ERISA and Section 4975 of the Code, the Managing Member may take certain actions it may determine to be necessary or appropriate, including requiring one or more Members to redeem or otherwise dispose of all or part of their Interest in the Registrant or terminating and liquidating the Registrant.
| (70) | U.S. Regulation |
The offering of Interests has not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or the laws of any applicable jurisdiction. The Registrant is not required to register, and is not registered, as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Accordingly, Members will not have the protections afforded by the Investment Company Act (which, among other matters, requires investment companies to have a majority of disinterested directors and regulates the relationship between the advisor and the investment company). The Managing Member is registered as an investment advisor with the SEC under the Investment Advisers Act of 1940, as amended.
Tax Risks
| (71) | Members Taxed Currently |
If the Registrant has profit for a taxable year, the profit will be includible in your taxable income, whether or not cash or other property is actually distributed to you by the Registrant. The Managing Member presently does not intend to make any distributions from the Registrant. Accordingly, it is possible that U.S. federal income taxes on your allocable share of the Registrant’s profits may exceed the amount of distributions to you, if any, for a taxable year, so that you must be prepared to fund any tax liability from redemptions of Interests or other sources. In addition, the Registrant may have capital losses from trading activities that cannot be deducted against the Registrant’s ordinary income (e.g., interest income, periodic net swap payments) so that you may have to pay taxes on ordinary income even if the Registrant generates a net loss.
| (72) | Limitation on Deductibility of “Investment Advisory Expenses” |
Non-corporate taxpayers are subject to certain limitations for deductions for “investment advisory expenses” for U.S. federal income tax and alternative minimum tax purposes. The IRS could argue that certain Registrant expenses are investment advisory expenses. Prospective Members should discuss with their tax advisors the tax consequences of an investment in the Registrant.
| (73) | Possibility of a Tax Audit of Both the Registrant and the Members |
The tax returns of the Registrant may be audited by the IRS. If such an audit results in an adjustment, Members could themselves be audited as well as being required to pay additional taxes, interest and possibly penalties.
| (74) | Short-Term Capital Gain |
Profits on futures contracts traded in regulated U.S. and some foreign exchanges, foreign currency contracts traded in the interbank market, and U.S. and some foreign exchange-traded options on commodities are generally taxed as short-term capital gain to the extent of 40% of gains with respect to section 1256 contracts and at least 50% of the gain arising from a mixed straddle account and are currently taxed at a maximum marginal ordinary U.S. federal income tax rate of 35%.
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| (75) | Tax Laws Are Subject to Change at Any Time |
Tax laws and court and IRS interpretations thereof are subject to change at any time, possibly with retroactive effect. Prospective Members are urged to discuss scheduled and potential tax law changes with their tax advisors.
THE FOREGOING RISK FACTORS DO NOT PURPORT TO BE A COMPLETE EXPLANATION OF THE RISKS INVOLVED IN THE OFFERING.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None
| ITEM 2. | PROPERTIES |
The Registrant does not own or lease any physical properties in the conduct of its business. The Registrant’s only place of business is the place of business of the Managing Member, located at 680 Fifth Avenue, Suite 1901, New York, New York 10019.
Certain administrative services are provided by Gemini Hedge Fund Services, LLC, the Registrant’s administrator, which is located at 80 Arkay Drive, Hauppauge, NY 11788. In addition, the Administrator maintains certain books and records of the Registrant, including certain books and records required by CFTC Rule 4.23(a), at its offices located as specified above.
| ITEM 3. | LEGAL PROCEEDINGS |
There are no material legal proceedings pending, on appeal, or concluded to which the Registrant is a party or to which any of its assets are subject.
| ITEM 4. | MINE SAFETY DISCLOSURES |
None
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| ITEM 5. | MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
| (a) | Market Information |
There is no secondary trading market for the Interests, and none is likely to develop. Interests may be redeemed or transferred subject to the conditions imposed by the Operating Agreement.
| (b) | Holders |
As of February 1, 2017, there were 0 holders of record, which include 0 Managing Member interests.
| (c) | Dividends |
The Managing Member has sole discretion in determining what distributions, if any, the Registrant will make to Members. The Registrant has never declared a dividend and does not intend to do so in the future.
| (d) | Securities Authorized for Issuance Under Equity Compensation Plans |
Not applicable.
| (e) | Performance Graph |
Not applicable.
| (f) | Issuer Purchases of Equity Securities |
The Registrant did not repurchase any Interests registered pursuant to Section 12 of the Exchange Act during the period January 1, 2016 through December 31, 2016.
| (g) | Unregistered Sales of Equity Securities and Use of Proceeds |
From January 1, 2007 to December 31, 2016, the Registrant sold Interests which resulted in aggregate proceeds to the Registrant of $63,781,978.
Through December 31, 2016, Members acquired Interests through a private placement as follows:
| Name of Member | Date of Acquisition | Value of Interest Acquired | ||||
| Diversified Futures Trust I | January 1, 2007 | $ | 12,966,087 | |||
| Diversified Futures Fund, L.P. | January 1, 2007 | $ | 3,636,165 | |||
| Kenmar Global Trust | January 1, 2007 | $ | 2,143,975 | |||
| Futures Strategic Trust | April 1, 2007 | $ | 5,002,950 | |||
| World Monitor Trust II – Series F | April 1, 2009 | $ | 14,195,000 | |||
| World Monitor Trust II – Series D | April 1, 2009 | $ | 4,887,000 | |||
| World Monitor Trust II – Series E | October 1, 2010 | $ | 12,170,845 | |||
| Kenmar Global Trust | December 1, 2010 | $ | 4,263,596 | |||
In addition, as of September 30, 2009, the Registrant served as an aggregate trading vehicle for the following funds: Diversified Futures Trust I; Futures Strategic Trust; World Monitor Trust II – Series D; and World Monitor Trust II – Series F (collectively, the “Feeder Funds”). Each Feeder Fund allocated 100% of its assets to the Registrant. Effective close of business on December 31, 2009, the Managing Member (which also serves as the managing owner of each of the Feeder Funds) (i) terminated each Feeder Fund, (ii) mandatorily redeemed each investor’s units in the Feeder Funds, and (iii) made an in-kind distribution to each Feeder Fund investor of such investor’s pro rata interest in the Registrant. As a result of these transactions, the Registrant distributed $23,047,803 of Interests to investors in the Feeder Funds, and such Feeder Fund investors became direct Members of the Registrant as of close of business on December 31, 2009. Effective October 1, 2010, World Monitor Trust II – Series E contributed all of its assets to the Registrant in the amount of $12,170,845. Effective December 1, 2010, Kenmar Global Trust contributed all of its assets to the Registrant in the amount of $4,263,596.
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| ITEM 6. | SELECTED FINANCIAL DATA |
The following table presents selected financial data of the Registrant for the years ended December 31, 2012 to December 31, 2016. This data should be read in conjunction with the financial statements of the Registrant and the notes thereto on pages 55 through 66 included in the Registrant’s 2016 Annual Report, which is filed as an exhibit hereto.
| Year Ended December 31, | ||||||||||||||||||||
| 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
| Total revenues (including interest) | $ | (1,304,314 | ) | $ | (111,886 | ) | $ | 478,486 | $ | (820,194 | ) | $ | (990,212 | ) | ||||||
| Net (loss) | $ | (1,803,180 | ) | $ | (809,230 | ) | $ | (368,007 | ) | $ | (2,070,837 | ) | $ | (2,802,608 | ) | |||||
| Total assets | $ | 5,001,097 | $ | 7,606,549 | $ | 10,403,772 | $ | 13,235,773 | $ | 19,129,460 | ||||||||||
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Critical Accounting Policies
General
Preparation of the financial statements and related disclosures in compliance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires the application of appropriate accounting rules and guidance. Applying these policies requires the Managing Member to make judgments, estimates and assumptions in connection with the preparation of the Registrant’s financial statements. Actual results may differ from the estimates used.
The Managing Member has evaluated the Registrant’s financial statements and related disclosures and has determined that the policies discussed below are critical accounting policies because they involve estimates, judgments and assumptions that are particularly complex, subjective or uncertain. For further discussion of the Registrant’s significant accounting policies, see Note 2 of the Registrant’s 2016 Annual Report, which is filed as an exhibit hereto.
The Registrant records all investments at fair value in its financial statements, with changes in fair value reported in the statements of operations. Generally, fair values are based on quoted market prices; however, in certain circumstances, significant judgments and estimates are involved in determining fair value in the absence of an active market closing price. The Registrant considers its investments in publicly-traded mutual funds, to be based on quoted prices in active markets for identical assets (Level 1). Level 3 inputs reflect the Registrant’s assumptions that it believes market participants would use in pricing the asset or liability. The Registrant develops Level 3 inputs based on the best information available in the circumstances, which may include indirect correlation to a market value, combinations of market values or the Registrant’s proprietary data. Level 3 inputs generally include information derived through extrapolation or interpolation of observable market data. The Registrant does not currently have any investments valued using Level 3 inputs.
The investment in Affiliated Investment Funds is reported at fair value in the Registrant’s statements of financial condition. As a practical expedient, fair value ordinarily is the fund’s net asset value as determined for the Affiliated Investment Funds in accordance with the fund’s valuation policies and reported at the time of the Registrant’s valuation by the management of the funds. Generally, the fair value of the Registrant’s investment in Affiliated Investment Funds represents the amount that the Registrant could reasonably expect to receive from the Affiliated Investment Funds if the Registrant’s investment was redeemed at the time of the valuation, based on information reasonably available at the time the valuation is made and that the Registrant believes to be reliable.
Of the Registrant’s investments at December 31, 2016, $1,299,872 or 27.55 % were classified as Level 1 and a majority of the remainder of Net Asset Value was invested in Affiliated Investment Fund. Of the Registrant’s investments at December 31, 2015, $1,296,166 or 100.00 % were classified as Level 1. There were no Level 2 investments at December 31, 2016 or 2015. There were no Level 3 investments at December 31, 2016 or 2015, nor any portion of the interim periods.
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The Registrant invests a portion of the excess cash balances not required for margin through certain investment funds which invest in (i) U.S. government securities (which include any security issued or guaranteed as to principal or interest by the United States), (ii) any certificate of deposit for any of the foregoing, including U.S. treasury bonds, U.S. treasury bills and issues of agencies of the United States government, (iii) corporate bonds or notes, or (iv) other instruments permitted by applicable rules and regulations (collectively, “Certain Investment Funds”). Such excess cash balances were held at US Bancorp Fund Services LLC as transfer agent for DoubleLine funds, at December 31, 2016 and 2015. The objective is to obtain a rate of return for the Registrant that balances risk and return relative to the historically low yields on short term cash deposits with banks and/or brokerage firms. There is no guarantee that the Managing Member will be successful in investing the excess cash successfully to obtain a greater yield than available on short term cash deposits with banks and/or brokerage firms. The Managing Member is paid monthly 1/12th of 50% of the first 1% of the positive returns earned on the Registrant’s investments in Certain Investment Funds. The calculation is based on the Registrant’s average annualized Net Asset Value, and any losses related to returns on the Certain Investment Funds must first be recovered through subsequent positive returns prior to the Managing Member receiving a payment. After the calculation of the amount payable to the Managing Member, the Registrant will be credited with all additional positive returns (or 100% of any losses) on the Registrant’s investment in Certain Investment Funds. If, at the end of any calendar year, a loss has been incurred on the returns for the Certain Investment Funds, then the loss carry forward will reset to zero for the next calendar year with regards to the calculation of the Managing Member’s portion of the Certain Investment Fund’s income.
In May 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-07 (“ASU 2015-07”), Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using net asset value per share as a practical expedient. ASU 2015-07 is effective for fiscal years beginning after December 15, 2015. The adoption of ASU 2015-07 did not have a material impact on the Company’s financial statements .
Liquidity and Capital Resources
The Registrant commenced operations on January 1, 2007. Contributions were raised and redemptions paid through new Members’ investments in and redemptions out of the aggregate trading vehicle through December 31, 2009. Beginning January 1, 2010, Individual Members may redeem directly from the Registrant on a monthly basis.
Subscriptions and Redemptions
Year Ended December 31, 2016
Subscriptions of interests for the year ended December 31, 2016 were $0. Redemptions of interests for the year ended December 31, 2016 were $815,586.
Year Ended December 31, 2015
Subscriptions of interests for the year ended December 31, 2015 were $0. Redemptions of interests for the year ended December 31, 2015 were $2,046,875.
Year Ended December 31, 2014
Subscriptions of interests for the year ended December 31, 2014 were $0. Redemptions of interests for the year ended December 31, 2014 were $2,362,862.
Liquidity
A portion of the Registrant’s net assets is held in cash, which is used as margin for its indirect trading in commodities through its investment in Affiliated Investment Funds.
Commodity contracts exposed to indirectly through the Registrant’s investment in Affiliated Investment Funds may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, commodity exchanges limit fluctuations in certain commodity futures contract prices during a single day by regulations referred to as “daily limits”. During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract for a particular commodity has increased or decreased by an amount equal to the daily limit, positions in the commodity can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent the Registrant from promptly liquidating its indirect exposure, through its investment in Affiliated Investment Funds, to commodity futures positions.
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Since the Registrant’s business is to trade futures, forward and option contracts through its investment in Affiliated Investment Funds, its capital is at risk due to changes in the value of these contracts (market risk) or the inability of counterparties to perform under the terms of the contracts (credit risk). The Registrant’s exposure to market risk is influenced by a number of factors including the volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of the Registrant’s speculative trading as well as the development of drastic market occurrences could result in losses considerably beyond the Registrant’s experience to date and could ultimately lead to a loss of all or substantially all of Members’ capital. The Managing Member attempts to minimize these risks by requiring the Registrant and the Trading Advisors to abide by various trading limitations and policies, which include limiting margin amounts, trading only in liquid markets and permitting the use of stop loss provisions. See Note 10 of the Registrant’s 2016 Annual Report, which is filed as an exhibit hereto, for a further discussion on the credit and market risks associated with the Registrant’s futures, forwards and option contracts held indirectly through its investment in Affiliated Investment Funds.
There are no known material trends, demands, commitments, events or uncertainties at the present time that are reasonably likely to result in the Registrant’s liquidity increasing or decreasing in a material way.
Capital Resources
The Registrant does not intend to raise additional capital through the sale of interests offered or through any borrowing. Due to the nature of the Registrant’s business, the Registrant does not contemplate making capital expenditures. The Registrant does not have, nor does it expect to have, any capital assets. Redemptions, exchanges, and sales of interests in the future will affect the amount of funds available for investments in futures interests in subsequent periods. It is not possible to estimate the amount, and therefore the impact, of future inflows and outflows of interests. There are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Registrant’s capital resource arrangements at the present time.
Market Overview
Following is a market overview for the years ended December 31, 2016, 2015 and 2014:
Year Ended December 31, 2016
U.S. equity indices began the year on a weak note, as prices tumbled to multi-month lows as skepticism over the strength of the global economy intensified. Thereafter, apart from brief - yet notable - pull-backs on the June Brexit vote and the November U.S. election, the trend was firmly higher. Upon reflection, the Trump victory proved to be a positive for the markets as investors focused on the promise of massive tax cuts and infrastructure spending. This enthusiasm, combined with a U.S. Federal Reserve rate hike, propelled U.S. indices to all-time highs in December. In western-European markets, the UK FTSE also ended the year at record highs as the post-Brexit decline in the British pound benefited exporters and commodity producers. Japanese equity markets also ended the year on a positive note as there as well, a sharp decline in the value of the currency during the 4th quarter boosted profit expectations for the indices constituents.
In currencies, the U.S. dollar spent much of the year drifting lower as deferred expectations for a U.S. Federal Reserve rate hike weighed on the greenback. That changed as better-than expected economic data, a Trump victory and hawkish Federal Reserve comments (which culminated in a December Fed interest rate hike) brightened the outlook for the greenback leaving the currency near 12-year highs at year-end. In other markets, Brexit uncertainty weighed on the British pound driving the currency to a three-decade low in October. The euro also ended the year lower on expectations for continued accommodative policy from the ECB. The safe-haven Japanese yen trended higher during the 1st half of the year only to give-up those gains as rising rates in the U.S. underscored the divergence between the two countries.
The primary drivers of global bond markets in 2016 were expectations for, and actions of, global central banks, Brexit, and the election of President Trump and his pro-growth economic agenda. In the U.S. market, the largest moves were seen in the beginning and end of year. In the first case, prices rallied sharply in January as expectations receded for Federal Reserve rate increases while in the second, prices fell sharply in November and into the last month of the year as the Federal Reserve raised rates eying the newly-elected President Trump’s promise of large fiscal stimulus. Conversely, In Europe, the bias was for lower rates on expectations of continued accommodate policy which left bond prices there generally higher at year end. In Japan, prices of the long-term government bond rallied through the 1st half of the year up until the third quarter when prices plunged as BOJ Governor Kuroda underwhelmed the market with less aggressive stimulus than what was anticipated; prices continued to drift lower thereafter.
As measured by the Bloomberg Commodity Index, commodities had their first positive year-end close since 2009. In part the enthusiasm was in anticipation of promised infrastructure spending by the new Trump administration. Witness copper and zinc, where prices jumped sharply in the 4th quarter rallying to a 17-month and nine-year high, respectively in November. Precious metals fared less well as gold slumped during the 4th quarter as Trump’s election spurred reflation hopes reducing the appeal of the yellow metal; gold nevertheless ended the year higher. In energy markets, crude oil broke out of its doldrums, capping its largest annual gain since 2009 as OPEC agreed to its first production cut in eight years to address record global inventories. Natural gas prices posted their largest annual gain since 2005 propelled by cold weather in the U.S.; this was a spectacular turnaround from early in the year when prices tumbled to the lowest levels since the 1990s. In grains, corn and wheat ended the year lower on sufficient global supplies while soybeans ended the year on a positive note. In tropical markets, cocoa prices fell to multi-year lows on sizable crops while Robusta coffee and sugar ended the year higher on supply worries.
Year Ended December 31, 2015
Price action during 2015 was influenced by several key macro factors including: divergence in global central bank activity, the outlook for growth in developed and emerging markets, particularly China; and plunging energy and commodity prices overall.
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Global equity markets were mixed in 2015. Major U.S. benchmarks remained within broad ranges during the first half of the year as market participants debated the timing of a Federal Reserve rate increase. That changed in August as a surprise devaluation of the Chinese yuan sent shockwaves through the markets, resulting in steep declines in U.S. equity indices. With time, the market stabilized and by year-end U.S. indices had clawed-back the majority of their losses. While the Dow Industrials and S&P 500 ended the year lower, the tech-heavy NASDAQ did better, ending the year with gains. In Europe, there was a bit more optimism early-on as indices moved steadily higher during the 1st quarter as expectations solidified that the ECB would remain accommodative for the foreseeable future. Thereafter, worries over a potential “Grexit,” the Chinese devaluation and a more pessimistic overall view of global growth in general weighed on the markets. A fourth quarter rally left the German DAX higher at year-end. Conversely, the UK FTSE ended the year with losses as investors looked for the Bank of England to potentially raise rates in the New Year. In Japan, the Topix and Nikkei gained during the first half of the year on expectations for further stimulus, and, despite the August sell-off, these markets ended the year with profits.
In currency markets, the U.S. dollar was the winner against most major and emerging currencies, supported by expectations that the Federal Reserve would lift rates – which it did in mid-December. Other market movers during the year included the Swiss National Bank’s January surprise to abandon the Swiss franc’s cap against the euro and the Chinese yuan devaluation weakened commodity markets, in particular currencies, and contributed to overall global uncertainty.
Expectations for, and actions of, global central banks combined with the overall health of the global economy were the predominant influences in global bonds. The preoccupation of when the U.S. would lift rates and the subsequent parsing of every Fed statement and economic indicator resulted in a directionless path for U.S. bond prices for much of the year. Conversely, there were some longer-term directional moves in European and Japanese markets where it was anticipated that central banks would continue to take an accommodative stance.
Commodity markets swooned in 2015 as the Bloomberg Commodity Index fell to levels not seen since 1999. With the exception of cocoa, energies, metals, grains, meats, coffee and sugar all ended the year lower. OPEC’s strategy to defend market share against higher-cost producers and further to scrap productions targets overall, resulted in a global surplus that could well persist will into 2016. Accordingly crude oil prices plunged in 2015, ending the year at multi-year lows; mild weather in the U.S. sent natural gas prices to 16 year lows. Worries over Chinese demand weighed on industrial metals with copper and zinc prices falling close to six-year lows; nickel fell to a 12-year low. Sufficient supply amid weakened demand pressured grain and tropical prices.
Year Ended December 31, 2014
Price action during 2014 was influenced by several key macro factors including: the expectations for global central bank activity, the outlook for growth in developed and emerging markets, the outbreak of Ukraine-Russian tensions and global oversupply in key commodity markets.
In global equities, U.S. markets took the spotlight, ending the year just shy of all-time highs as low inflationary readings and global growth worries pushed back investors’ expectations for a U.S. Federal Reserve (the “Federal Reserve”) interest rate hike until late 2015. Outside of the U.S. the trend was less clear. U.K. equities traded in a broad range, ultimately ending the year lower as falling commodity prices and shifting expectations for BOE activity weighed heavily on the FTSE. Conversely, the German DAX was range bound for much of the first half of the year, ultimately rallying into year-end as the ECB announced additional accommodative measures. In Japan, news that the Bank of Japan would embark on a record stimulus program pushed the TOPIX and Nikkei higher during the fourth quarter leaving both indices higher at year-end.
Currency markets were generally quiet for the first half of the year. Thereafter, the dollar embarked on an explosive rally against its major counterparts as better economic data fueled expectations that the U.S. would be the first to hike in 2015. This was in stark contrast to Europe where expectations for further stimulus to prop-up the ailing economy weighed on the euro. Additional accommodative policy from the Bank of Japan resulted in the Japanese yen ending 2014 at lower levels versus the USD. Finally, lower energy and industrial metals prices depressed the economies of commodity-producing nations and as such, currencies like the Australian dollar and Norwegian krone weakened in 2014.
Expectations for, and actions of, global central banks combined with the overall health of the global economy were the predominant influences in global bonds. In Europe, yields fell to all-time lows as worse-than-expected growth readings, low inflation and expectations for further stimulus weighed on the market. Similarly, yields declined in U.S. bond markets as expectations for an interest rate hike were pushed further back into 2015; U.S. bonds also benefited from safe-haven buying throughout the year. In Japan, the Bank of Japan’s decision to embark on a massive bond-buying program sent prices there as well higher.
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Prices in many global commodity markets experienced sweeping moves in 2014. In energies, prices swooned during the second half of the year on surging global supply amid declining global demand. In base metals, copper ended the period sharply lower on worries of declining demand, notably from China the world’s biggest user of the metal; aluminum prices ended the year slightly higher. In precious metals, gold and silver ended the year lower. In grain markets, corn and soybean markets moved sharply lower mid-year on expectations for a significant 2014 US harvest; by year-end prices had rallied off those lows. In tropical markets, NY cocoa and coffee markets rallied while sugar prices declined and in meats, cattle prices ended the year on an up-note versus hot prices which ended the year lower.
Sector Performance
Due to the nature of the Registrant’s indirect trading activities, a period-to-period comparison of its indirect trading results is not meaningful. However, set forth below are the following:
| (a) | the major sectors to which the Registrant’s assets were allocated indirectly as of December 31, 2016, 2015 and 2014, measured as a percentage of the “gross speculator margin” (i.e., the minimum amount of cash or marginable securities a speculator must post when buying or selling futures assets); and |
| (b) | a discussion of the Registrant’s trading results for the major sectors in which the Registrant traded indirectly for the years ended December 31, 2016, 2015 and 2014. |
Year Ended December 31, 2016
As of December 31, 2016, the allocation of the Registrant’s assets, through its investment in Affiliated Investment Funds, to major sectors was as follows:
| Sector | Allocation | |||
| Currencies | 21.70 | % | ||
| Energies | 2.36 | % | ||
| Agricultural | 5.83 | % | ||
| Indices | 14.13 | % | ||
| Interest Rates | 39.49 | % | ||
| Metals | 16.49 | % | ||
| TOTAL | 100.00 | % | ||
Trading results for the major sectors in which the Registrant traded indirectly for the year ended December 31, 2016 were as follows:
Currencies: (-) The Registrant experienced losses in currencies largely due to positions in the Australian dollar and euro. Largest profits were realized in the British pound.
Energies: (-) The Registrant experienced losses as prices of natural gas vacillated throughout the year. Small profits were posted in crude oil which ended the year higher on news of OPEC production cuts.
Grains: (-) The Registrant experienced losses throughout the complex. Overall, largest losses were posted in the 3rd quarter in soybeans as prices reversed lower.
Indices: (-) The Registrant experienced losses due to trading in the 2nd quarter where losses accumulated in U.S. and European stock markets. Overall, losses for the year were largest in the EuroStoxx 50 and German Dax.
Interest Rates: (+) The Registrant experienced gains in global rates, particularly the U.S. and German bond markets, as prices rallied during the 1st and 2nd quarters of the year.
Meats: (+) The Registrant experienced gains in meats.
Metals: (-) The Registrant experienced losses in precious and industrial metals. In precious metals, positions in gold and silver were unprofitable; in industrial metals, copper trading was unprofitable in all four quarters.
Softs: (-) The Registrant experienced losses in tropicals due to positions in cocoa and coffee.
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Year Ended December 31, 2015
As of December 31, 2015, the Registrant had no assets through its investment in Affiliated Investment Funds.
Trading results for the major sectors in which the Registrant traded indirectly for the year ended December 31, 2015 were as follows:
Currencies: (+) The Registrant experienced gains in currencies as the dollar ended the year higher against many developed and emerging market currencies.
Energies: (+) The Registrant experienced profits as prices of WTI and Brent crude oil fell to multi-year lows. Natural gas prices also moved sharply lower in 2015.
Grains: (-) The Registrant experienced losses in grain markets as prices slid on sufficient global supply amid weak demand.
Indices: (-) The Registrant experienced losses, the largest of which were realized during the third quarter, as global indices reacted negatively to a surprise devaluation of the Chinese yuan.
Interest Rates: (+) The Registrant experienced gains in U.S., Canadian and Pacific Rim interest rates which were sufficient to cover losses in European rates.
Meats: (+) The Registrant experienced gains in meats.
Metals: (-) The Registrant experienced losses in metals as unprofitable positions in precious metals erased gains in the base metals complex.
Softs: (+) The Registrant experienced a gains in tropicals; coffee and sugar ended the period lower while cocoa ended the year at higher prices.
Year Ended December 31, 2014
As of December 31, 2014, the allocation of the Registrant’s assets, through its investment in Affiliated Investment Funds, to major sectors was as follows:
| Sector | Allocation | |||
| Currencies | 25.59 | % | ||
| Energies | 2.92 | % | ||
| Grains | 5.78 | % | ||
| Indices | 13.50 | % | ||
| Interest Rates | 29.76 | % | ||
| Meats | 0.30 | % | ||
| Metals | 15.47 | % | ||
| Tropicals | 6.68 | % | ||
| TOTAL | 100.00 | % | ||
Trading results for the major sectors in which the Registrant traded indirectly for the year ended December 31, 2014 were as follows:
Currencies: (+) The Registrant experienced a majority of its gains in the euro and dollar index. The majority of its losses were incurred in the Mexican peso and Australian dollar.
Energies: (+) The Registrant experienced a majority of profits in gas oil, heating oil and Brent crude. The majority of its losses were incurred in RBOB gasoline.
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Grains: (+) The Registrant experienced a majority of its gains in soybeans. The majority of its losses were incurred in corn and wheat.
Indices: (-) The Registrant experienced no gains. The majority of its losses were incurred in European stock indices.
Interest Rates: (+) The Registrant a majority of its gains in U.S. rates. The majority of its losses were incurred in European rates.
Meats: (-) The Registrant experienced no gains in meats. The majority of its losses were incurred in live cattle.
Metals: (-) The Registrant experienced a majority of its gains in palladium. The majority of its losses were incurred in copper and gold.
Tropicals: (+) The Registrant experienced a majority of its gains in sugar. The majority of its losses were incurred in cocoa and orange juice.
Results of Operations
Year Ended December 31, 2016
The Net Asset Value of the Registrant as of December 31, 2016 was $4,7117,490, a decrease of $2,618,766 from the December 31, 2015 Net Asset Value of $7,336,256, primarily due to the effect of Member redemptions and negative trading performance during the year.
The Registrant’s performance for the year ended December 31, 2016 was (25.82)%. Performance includes the percentage change in the Registrant’s Net Asset Value excluding the effect of any subscriptions and redemptions and includes the percentage impact of investment gains/(losses) less any commissions and related fees and expenses. Past performance is not necessarily indicative of future results.
The Registrant’s total gain from its investment in securities for the year ended December 31, 2016 was approximately $3,000.
The Registrant’s total (loss) from its investment in Affiliated Investment Funds for the year ended December 31, 2016 was approximately $(1,338,000).
Dividend income for the year ended December 31, 2016 was approximately $31,000, a decrease of approximately $3,000 as compared to the year ended December 31, 2015. For a further discussion of these investments, see Note 2 of the Registrant’s 2016 Annual Report, which is filed as an exhibit hereto.
Brokerage commissions and other transaction fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2016 were approximately $305,000, an increase of approximately $245,000 as compared to the year ended December 31, 2015.
Management fees to the Trading Advisors, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2016 were approximately $47,000, a decrease of approximately $103,000 as compared to the year ended December 31, 2015, primarily due to the decrease in the Net Asset Value discussed above.
Management fees to the Managing Member for the year ended December 31, 2016 were approximately $184,000, a decrease of approximately $70,000 as compared to the year ended December 31, 2015, primarily due to the decrease in the Net Asset Value discussed above.
Trading Advisor incentive fees are based on the New High Net Trading Profits generated by the Trading Advisors, as defined in the Trading Advisory Agreements between the Registrant and the Trading Advisors. Trading Advisor incentive fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2016, were approximately $32,000.
An administrative services fee, which is indirectly paid to Clarity for risk management and related services with respect to monitoring the Trading Advisors through the Affiliated Investment Funds and reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2016 was approximately $19,000, a decrease of approximately $7,000 as compared to the year ended December 31, 2015, primarily due to the decrease in the Net Asset Value discussed above.
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Service fees for the year ended December 31, 2016 were approximately $191,000, a decrease of approximately $104,000 as compared to the year ended December 31, 2015, primarily due to the decrease in the Net Asset Value discussed above. For a further discussion of this fee, see Note 6 of the of the Registrant’s 2016 Annual Report, which is filed as an exhibit hereto.
Managing Member interest earned on Certain Investment Funds for the year ended December 31, 2016 was approximately $27,000, an increase of approximately $17,000 as compared to the year ended December 31, 2015. For a further discussion of this fee, see Note 4 of the Registrant’s 2016 Annual Report, which is filed as an exhibit hereto.
Operating expenses include accounting, audit, tax, and legal fees. Operating expenses for the year ended December 31, 2016 were approximately $174,000.
Year Ended December 31, 2015
The Net Asset Value of the Registrant as of December 31, 2015 was $7,336,256, a decrease of $2,856,105 from the December 31, 2014 Net Asset Value of $10,192,361, primarily due to the effect of Member redemptions and negative trading performance during the year.
The Registrant’s performance for the year ended December 31, 2015 was (9.36)%. Performance includes the percentage change in the Registrant’s Net Asset Value excluding the effect of any subscriptions and redemptions and includes the percentage impact of investment gains/(losses) less any commissions and related fees and expenses. Past performance is not necessarily indicative of future results.
The Registrant’s total gain from its investment in securities for the year ended December 31, 2015 was approximately $16,000.
The Registrant’s total (loss) from its investment in Affiliated Investment Funds for the year ended December 31, 2015 was approximately $(162,000).
Dividend income for the year ended December 31, 2015 was approximately $34,000, a decrease of approximately $49,000 as compared to the year ended December 31, 2014. For a further discussion of these investments, see Note 2 of the Registrant’s 2015 Annual Report.
Brokerage commissions and other transaction fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2015 were approximately $60,000, an increase of approximately $36,000 as compared to the year ended December 31, 2014.
Management fees to the Trading Advisors, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2015 were approximately $150,000, a decrease of approximately $36,000 as compared to the year ended December 31, 2014, primarily due to the decrease in the Net Asset Value discussed above.
Management fees to the Managing Member for the year ended December 31, 2015 were approximately $254,000, a decrease of approximately $39,000 as compared to the year ended December 31, 2014, primarily due to the decrease in the Net Asset Value discussed above.
Trading Advisor incentive fees are based on the New High Net Trading Profits generated by the Trading Advisors, as defined in the Trading Advisory Agreements between the Registrant and the Trading Advisors. Trading Advisor incentive fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2015, were approximately $68,000.
An administrative services fee, which is indirectly paid to Clarity for risk management and related services with respect to monitoring the Trading Advisors through the Affiliated Investment Funds and reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2015 was approximately $26,000, a decrease of approximately $1,000 as compared to the year ended December 31, 2014, primarily due to the decrease in the Net Asset Value discussed above.
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Service fees for the year ended December 31, 2015 were approximately $295,000, a decrease of approximately $50,000 as compared to the year ended December 31, 2014, primarily due to the decrease in the Net Asset Value discussed above. For a further discussion of this fee, see Note 6 of the of the Registrant’s 2015 Annual Report.
Managing Member interest earned on Certain Investment Funds for the year ended December 31, 2015 was approximately $10,000, a decrease of approximately $39,000 as compared to the year ended December 31, 2014. For a further discussion of this fee, see Note 4 of the Registrant’s 2015 Annual Report.
Operating expenses include accounting, audit, tax, and legal fees. Operating expenses for the year ended December 31, 2015 were approximately $300,000.
Year Ended December 31, 2014
The Net Asset Value of the Registrant as of December 31, 2014 was $10,192,361, a decrease of $2,730,869 from the December 31, 2013 Net Asset Value of $12,923,230, primarily due to the effect of Member redemptions and negative trading performance during the year.
The Registrant’s performance for the year ended December 31, 2014 was (1.54)%. Performance includes the percentage change in the Registrant’s Net Asset Value excluding the effect of any subscriptions and redemptions and includes the percentage impact of investment gains/(losses) less any commissions and related fees and expenses. Past performance is not necessarily indicative of future results.
The Registrant’s total loss from its investment in securities for the year ended December 31, 2014 was approximately $(13,000).
The Registrant’s total gain from its investment in Affiliated Investment Funds for the year ended December 31, 2014 was approximately $408,000.
Dividend income for the year ended December 31, 2014 was approximately $83,000, a decrease of approximately $38,000 as compared to the year ended December 31, 2013. For a further discussion of these investments, see Note 2 of the Registrant’s 2014 Annual Report.
Brokerage commissions and other transaction fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2014 were approximately $24,000, a decrease of approximately $12,000 as compared to the year ended December 31, 2013, primarily due to the decrease in the Net Asset Value discussed above.
Management fees to the Trading Advisors, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2014 were approximately $186,000, a decrease of approximately $97,000 as compared to the year ended December 31, 2013, primarily due to the decrease in the Net Asset Value discussed above.
Management fees to the Managing Member for the year ended December 31, 2014 were approximately $293,000, a decrease of approximately $145,000 as compared to the year ended December 31, 2013, primarily due to the decrease in the Net Asset Value discussed above.
Trading Advisor incentive fees are based on the New High Net Trading Profits generated by the Trading Advisors, as defined in the Trading Advisory Agreements between the Registrant and the Trading Advisors. Trading Advisor incentive fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2014, were approximately $156,000.
An administrative services fee, which is indirectly paid to Clarity for risk management and related services with respect to monitoring the Trading Advisors through the Affiliated Investment Funds and reflected within the respective net asset values of each of the Affiliated Investment Funds, for the year ended December 31, 2014 was approximately $27,000, a decrease of approximately $14,000 as compared to the year ended December 31, 2013, primarily due to the decrease in the Net Asset Value discussed above.
Service fees for the year ended December 31, 2014 were approximately $345,000, a decrease of approximately $194,000 as compared to the year ended December 31, 2013, primarily due to the decrease in the Net Asset Value discussed above. For a further discussion of this fee, see Note 6 of the of the Registrant’s 2014 Annual Report.
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Managing Member interest earned on Certain Investment Funds for the year ended December 31, 2014 was approximately $49,000, an increase of approximately $21,000 as compared to the year ended December 31, 2013. For a further discussion of this fee, see Note 4 of the Registrant’s 2014 Annual Report.
Operating expenses include accounting, audit, tax, and legal fees. Operating expenses for the year ended December 31, 2014 were approximately $274,000.
Inflation
Inflation has had no material impact on the operations or on the financial condition of the Registrant from inception through December 31, 2016.
Off-Balance Sheet Arrangements and Contractual Obligations
The Registrant does not have any off-balance-sheet arrangements (as defined in Regulation S-K 303(a)(4)(ii)) that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to Members.
The Registrant’s contractual obligations are with the Managing Member, the Trading Advisors it accesses through its investment in Affiliated Investment Funds and its commodity broker. Trading Advisor management fees payable by the Registrant to the Trading Advisors through CTA Choice, and management fees payable to the Managing Member, are calculated as a fixed percentage of the Registrant’s Net Asset Value or Allocated Assets. Incentive fees payable by the Registrant to the Trading Advisors through CTA Choice are at a fixed rate, calculated as a percentage of the Registrant’s “New High Net Trading Profits” (as defined in the Trading Advisory Agreements). As such, the Managing Member cannot anticipate the amounts to be paid for future periods as Net Asset Values and New High Net Trading Profits are not known until a future date.
Commissions payable to the Registrant’s commodity broker are based on a cost per executed trade and, as such, the Managing Member cannot anticipate the amount that will be required under the brokerage agreement, as the level of executed trades are not known until a future date. These agreements are effective for one-year terms, renewable automatically for additional one-year terms unless terminated. Additionally, these agreements may be terminated by either party thereto for various reasons. Additionally, since the Registrant does not enter into other long-term debt obligations, capital lease obligations, operating lease obligations or other long-term liabilities that would otherwise be reflected on the Registrant’s statements of financial condition, a table of contractual obligations has not been presented. For a further discussion of the Registrant’s contractual obligations, see Notes 1, 3, 4 and 5 of the Registrant’s 2016 Annual Report, which is filed as an exhibit hereto.
| ITEM 7A. | QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Introduction
Past Results Not Necessarily Indicative of Future Performance
The Registrant is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and substantially all of the Registrant’s assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Registrant’s main line of business.
Market movements result in frequent changes in the fair market value of the Registrant’s open positions and, consequently, in its earnings and cash flow. The Registrant’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Registrant’s open positions and the liquidity of the markets in which it trades.
The Registrant rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular futures market scenario will affect performance, and the Registrant’s past performance is not necessarily indicative of its future results.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Registrant’s market risk exposures - except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Registrant manages its primary market risk exposures constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.
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The Registrant’s primary market risk exposures as well as the strategies used and to be used by the Managing Member and the Trading Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks are one of which could cause the actual results of the Registrant’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Registrant. There can be no assurance that the Registrant’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Members must be prepared to lose all or substantially all of their investment in the Registrant.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Managing Member and the Trading Advisors, through CTA Choice attempt to manage the risk of the Registrant’s open positions is essentially the same in all market categories traded.
The Trading Advisors attempt to minimize market risk exposure by applying their own risk management trading policies that include the diversification of trading assets into various market sectors. Additionally, the Managing Member’s oversight committee is responsible for evaluating and overseeing the Trading Advisors’ trading policies. The oversight committee meets periodically to discuss and analyze issues such as liquidity, position size, capacity, performance cycles, and new product and market strategies.
The Managing Member attempts to minimize market risk exposure by requiring the Trading Advisors to abide by various trading limitations and policies. The Managing Member monitors compliance with these trading limitations and policies which include, but are not limited to, limiting the amount of margin or premium required for any one commodity or all commodities combined and generally limiting transactions to contracts which are traded in sufficient volume to permit the taking and liquidating of positions. Additionally, the Managing Member shall automatically terminate the Trading Advisors through termination of the CTA Fund if the Net Asset Value of the Registrant declines by 40% during any year or since the commencement of trading activities. Furthermore, the Operating Agreement provides that the Registrant will liquidate its positions, and eventually dissolve, if the Registrant experiences a decline in the Net Asset Value of 50% in any year or since the commencement of trading activities. In each case, the decline in Net Asset Value is after giving effect for contributions, distributions and redemptions. The Managing Member may impose additional restrictions (through modifications of such trading limitations and policies) upon the trading activities of the Trading Advisors as it, in good faith, deems to be in the best interest of the Registrant.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The financial statements are incorporated by reference to pages 46 through 83 of the Registrant’s 2016 Annual Report which is filed as an exhibit hereto.
Selected unaudited quarterly financial data for the years ended December 31, 2016 and 2015 are summarized below:
| First | Second | Third | Fourth | |||||||||||||
| Quarter | Quarter | Quarter | Quarter | |||||||||||||
| 2016: | ||||||||||||||||
| Total revenues gain (losses) (including interest) | $ | (92,028 | ) | $ | (332,704 | ) | $ | (735,174 | ) | $ | (144,407 | ) | ||||
| Total revenues gain (losses) (including interest) less commissions and other transaction fees | $ | (92,028 | ) | $ | (332,704 | ) | $ | (735,174 | ) | $ | (144,407 | ) | ||||
| Net gain (loss) | $ | (231,417 | ) | $ | (473,714 | ) | $ | (855,245 | ) | $ | (242,804 | ) | ||||
| First | Second | Third | Fourth | |||||||||||||
| Quarter | Quarter | Quarter | Quarter | |||||||||||||
| 2015: | ||||||||||||||||
| Total revenues (losses) (including interest) | $ | 601,852 | $ | (454,172 | ) | $ | (158,313 | ) | $ | (101,253 | ) | |||||
| Total revenues (losses) (including interest) less commissions and other transaction fees | $ | 601,852 | $ | (454,172 | ) | $ | (158,313 | ) | $ | (101,253 | ) | |||||
| Net gain (loss) | $ | 398,517 | $ | (640,531 | ) | $ | (320,564 | ) | $ | (246,652 | ) | |||||
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There were no extraordinary, unusual or infrequently occurring items recognized in any quarter reported above, and the Registrant has not disposed of any segments of its business. There have been no year-end adjustments that are material to the results of any fiscal quarter reported above.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None
| ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
The Registrant’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed by the Registrant in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to the Registrant’s management, including the Managing Member’s President and Director of Fund Administration (who, in these capacities, function as the Principal Executive Officers and Principal Financial/Accounting Officer, respectively, of the Registrant), as appropriate to allow for timely decisions regarding required disclosure.
In designing and evaluating the Registrant’s disclosure controls and procedures, the Managing Member recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in all control systems, no evaluation of the controls can prove absolute assurance that all control issues and instances of fraud, if any, within the Registrant have been detected.
The Managing Member’s management, under the supervision and with the participation of certain officers of the Managing Member (including the Managing Member’s President and Director of Fund Administration ), has evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of December 31, 2016. Based upon such evaluation, the Managing Member’s President and Director of Fund Administration have concluded that, as of December 31, 2016, the Registrant’s disclosure controls and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
The Registrant’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of the Registrant’s management, including the Managing Member’s President and Director of Fund Administration, the Registrant conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2016 based on the framework in “Internal Control – Integrated Framework” issued in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the evaluation under the framework in “Internal Control – Integrated Framework” issued in 1992 by COSO, the Managing Member concluded that the Registrant’s internal controls over financial reporting were effective as of December 31, 2016.
There are inherent limitations in the effectiveness of any internal control system, including the possibility of human error and the circumvention of overriding controls. Because of these inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Attestation Report of the Registered Public Accounting Firm
The Registrant’s 2016 Annual Report does not include an attestation report of the Registrant’s independent registered public accounting firm regarding the Registrant’s internal control over financial reporting. Management’s report was not subject to attestation by the Registrant’s independent registered public accounting firm pursuant to rules of the SEC that permit the Registrant to provide only management’s report in the Registrant’s 2016 Annual Report.
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Changes in Internal Control Over Financial Reporting
There have been no changes in the Registrant’s internal control over financial reporting (as defined in Rules 13a - 15(f) and 15d - 15(f) under the Exchange Act) during the fourth quarter of 2016 that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
| ITEM 9B. | OTHER INFORMATION |
None
[Remainder of page left blank intentionally.]
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| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
The Registrant had no directors or executive officers. The Registrant is managed by the Managing Member. The directors and executive officers of the Managing Member are as follows:
Jim Parrish has been listed as a principal and is the President of the Managing Member, Kenmar Global Investment Management, LLC (“KGIM”) and Clarity Managed Account & Analytics Platform, LLC (“Clarity”); Mr. Parrish has responsibility for various credit, volatility, futures, FX and equity investment strategies. Mr. Parrish has been investing in hedge funds, private equity and other alternative investments for over 25 years. Other responsibilities include serving as Managing Partner of a boutique risk advisory business where he provides guidance on mergers, acquisitions and corporate restructurings, including expert witness services for credit related matters. Mr. Parrish is also the Chief Compliance Officer of the Managing Member, KGIM and Clarity since November 2015. Earlier he was the CEO of a risk management firm that was sold to a major financial services firm. Mr. Parrish’s career in financial services began at Salomon Brothers in mortgage securities, then Moody’s Investors Service where he worked for 14 years holding global analytic and executive positions in Mortgage & Asset Backed Securities, Financial Institutions, Corporate Finance and Quantitative Risk Management. He has worked with hundreds of companies on capital issues amounting to more than one trillion dollars of securities, including expert testimony before juries and regulatory bodies globally. Mr. Parrish received his BA at Shepherd College and an MBA in Finance from The George Washington University. He holds a certificate in Mergers & Acquisitions from UCLA and a certificate in French Studies from the University of Bourgogne
Kenneth A. Shewer has been listed as a principal registered as an associated person and has been an NFA associate member of the Managing Member since February 8, 1984, May 1, 1985 and August 1, 1985, respectively. He is the Chairman and Chief Investment Officer of the Managing Member. Mr. Shewer has in the past been the Chairman and Co-Chief Executive Officer of KGIM an investment management firm, since its inception in October 2005, and has been listed as a principal, registered as an associated person and has been an NFA associate member since December 12, 2005. Mr. Shewer is also Chairman and Chief Investment Officer of Clarity, an investment management firm, since its inception in May 2009, and has been listed as a principal, registered as an associated person and has been an NFA associate member since June 9, 2009, June 10, 2009 and June 24, 2009, respectively. Mr. Shewer graduated from Syracuse University with a B.S. degree in 1975. Mr. Shewer is a founding member and member of the Board of the Greenwich Roundtable.
Peter J. Fell has been Senior Vice President and Director of Due Diligence since joining the Managing Member in September 2004. He has been listed as a principal of the Managing Member since February 6, 2007. Mr. Fell has been Senior Vice President and Director of Due Diligence of KGIM, an investment management firm, since its inception in October 2005, and has been listed as a principal since February 6, 2007. Mr. Fell has been Senior Vice President and Director of Due Diligence of Clarity, an investment management firm, since its inception in May 2009, and has been listed as a principal since June 9, 2009. Mr. Fell holds an A.B. cum laude in Music Theory and History and an M.B.A. in Finance from Columbia University.
Atinder S. Jaggi has been the Director of Fund Administration since November 2015. Mr. Jaggi joined the Managing Member in 2008. Mr. Jaggi is responsible for the development and execution of the administration group support responsibilities including managing relationships with services providers and has oversight of staff performing fund accounting, audit, tax and regulatory filing functions. He is also responsible in conjunction with outside counsel to draft, review and finalize/update offering documents, trading advisor agreements and various other related operating agreements to onboard managed accounts. Mr. Jaggi received a B.S. in Commerce from Delhi University, India in 2003, M.S. in Commerce from Annamalai University, India in 2005 and a MBA in Finance from University of Bridgeport, CT in 2008.
Section 16(a) Beneficial Ownership Reporting Compliance
Certain of the Managing Member’s directors and officers and any persons holding more than ten percent of the Registrant’s interests (“Ten Percent Owners”) are required to report their initial ownership of interests and any subsequent changes in that ownership to the SEC on Forms 3, 4 or 5. Such directors and officers and Ten Percent Owners are required by SEC regulations to furnish the Registrant with copies of all Forms 3, 4 and 5 they file. There are no Ten Percent Owners of the Registrant’s interests. All filing requirements of Section 16(a) of the Exchange Act were timely complied with during the fiscal year. In making these disclosures, the Registrant has relied solely on written representations of the Managing Member’s directors and officers and the Registrant’s Ten Percent Owners or copies of the reports that they have filed with the SEC during and with respect to its most recent fiscal year.
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Code of Professional Conduct
The Managing Member has adopted a Code of Professional Conduct for its President and Director of Fund Administration (who, in these capacities, function as the Principal Executive Officer and Principal Financial/Accounting Officer, respectively, of the Registrant), accounting managers and persons performing similar functions. A copy of the Code of Professional Conduct is attached as an exhibit hereto.
Audit Committee Financial Expert
The Registrant itself does not have any employees. Kenmar Preferred Investments, LLC serves as Managing Member of the Registrant. The Board of Directors of the Managing Member has delegated audit committee responsibilities to the Internal Controls and Disclosure Committee. Atinder Jaggi is the Managing Member’s Director of Fund Administration (and, in that capacity, functions as the Registrant’s Principal Financial/Accounting Officer), is a member of the Internal Controls and Disclosure Committee, and serves as the “audit committee financial expert” for the Registrant.
| ITEM 11. | EXECUTIVE COMPENSATION |
The Registrant does not itself have any officers, directors or employees. Effective January 1, 2010, the Registrant pays management fees to the Managing Member. The managing officers of the Managing Member are remunerated by the Managing Member in their respective positions.
The managing officers receive no “other compensation” from the Registrant. There are no compensation plans or arrangements relating to a change in control of either the Registrant or the Managing Member.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
As of March 1, 2017, the Managing Member owns no interest in the Registrant.
As of March 1, 2017, no Member beneficially owned more than five percent (5%) of the outstanding interests issued by the Registrant.
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The Registrant has and will continue to have certain relationships with the Managing Member and its affiliates.
Kenmar Preferred Investments, LLC serves as the Registrant’s Managing Member. Beginning January 1, 2010, the Registrant will pay to the Managing Member in advance a monthly management fee equal to 1/12th of 6% (6% per annum) of the Net Asset Value of the Registrant as of the beginning of each month.
The Registrant pays a monthly administrative services fee indirectly to Clarity through its investment in Affiliated Investment Funds based on their respective beginning of month Allocated Assets.
The Registrant reimburses the Managing Member on a quarterly basis for certain legal, accounting, administrative and registrar and transfer agent work performed by certain of the Managing Member’s personnel for and on behalf of the Registrant. The amount reimbursed is based on (i) the number of hours devoted by the Managing Member’s personnel for and on behalf of the Registrant and (ii) a commercially reasonable rate for such personnel. For the years ended December 31, 2016, 2015 and 2014, the Registrant reimbursed the Managing Member $203,420, $210,048 and $308,837, respectively, for all related party services provided by the Managing Member’s personnel on behalf of the Registrant.
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
Audit Fees and All Other Fees
The Registrant’s principal accountant since October 15, 2007 has been EisnerAmper LLP (“EisnerAmper”).
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On March 25, 2016, Managing Member, the Managing Member of the Registrant, dismissed EisnerAmper as the registered public accounting firm for the Registrant. The report of EisnerAmper on the Registrant’s financial statements as of and for the fiscal years ended December 31, 2014 and December 31, 2015 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainties, audit scope, or accounting principles.
On April 11, 2016, the Managing Member, on behalf of the Registrant, approved the engagement of Arthur F. Bell, Jr. & Associates, L.L.C. (“Arthur Bell”) as the registered public accounting firm for the Registrant. We have been advised by Arthur Bell that neither the firm, nor any member of the firm, has any financial interest, direct or indirect, in any capacity in the Registrant or its affiliates.
(a) Audit Fees
Fees for audit services performed by Arthur Bell and EisnerAmper totaled approximately $44,000 and $59,000 for 2016 and 2015, respectively, including fees associated with the review of the Registrant’s quarterly reports on Form 10-Q.
(b) Audit-Related Fees
The audit-related fees billed to the Registrant by Arthur Bell and EisnerAmper totaled $0 and $0 for 2016 and 2015, respectively.
(c) Tax Fees
Fees for tax services performed by Arthur Bell totaled approximately $8,000 and $9,000 for 2016 and 2015, respectively.
(d) All Other Fees
The other fees billed to the Registrant by Arthur Bell and EisnerAmper for 2016 and 2015 totaled $0.
Because the Registrant has no audit committee, the Board of Directors of the Managing Member has delegated audit committee responsibilities to the Internal Controls and Disclosure Committee of the Managing Member. The Internal Controls and Disclosure Committee has not established pre-approval policies and procedures with respect to the engagement of audit or permitted non-audit services rendered to the Registrant. Consequently, all audit and permitted non-audit services provided by Arthur Bell are approved by the Internal Controls and Disclosure Committee.
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Annual
Report
Page Number
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS SCHEDULES |
| Exhibit | ||
| Number | Description of Document | |
| 3.1 | Certificate of Formation of KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 3.1 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 3.2 | Certificate of Amendment of Certificate of Formation of KMP Futures Fund I LLC (incorporated by reference from Exhibit 3.2 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 3.3 | Amended and Restated Limited Liability Company Operating Agreement of KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 3.3 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 10.1 | Advisory Agreement among KMP Futures Fund I LLC (f/k/a WCM Pool LLC), Kenmar Preferred Investments Corp. (f/k/a Preferred Investment Solutions Corp.) and Winton Capital Management Limited (incorporated by reference from Exhibit 10.1 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) |
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| 10.2 | Services Agreement between Spectrum Global Fund Administration, L.L.C. and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.2 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 10.3 | Customer Agreement between the KMP Futures Fund I LLC (f/k/a WCM Pool LLC) and UBS Securities LLC (incorporated by reference from Exhibit 10.3 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 10.4 | Amendment No. 1 to Customer Agreement between KMP Futures Fund I LLC (f/k/a WCM Pool LLC) and UBS Securities LLC (incorporated by reference from Exhibit 10.4 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 10.5 | FX Prime Brokerage Agreement between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.5 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 10.6 | ISDA Master Agreement, Schedule and Credit Support Annex between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.6 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 10.7 | Amendment to ISDA Master Agreement between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.7 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 10.8 | Master Confirmation Agreement for Non-Deliverable Forward FX Transactions between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.8 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 10.9 | Master Confirmation for Exotic Options between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.9 of the Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009) | |
| 31.1 | Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith) | |
| 31.2 | Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith) | |
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) | |
| 32.2 | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) | |
| 99.1 | Notice to Members regarding certain changes to the ownership and structure of the Registrant’s underlying managers (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on August 17, 2012) | |
| 99.2 | Notice to Members regarding certain changes to the ownership and structure of the Registrant’s underlying managers (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on November 5, 2012) | |
| 99.3 | Notice to Members of Administration Agreement and Middle/Back Office Agreement between GlobeOp Financial Services LLC and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference to Exhibit 99.3 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on February 28, 2011) | |
| 99.4 | Notice to Members regarding certain changes to the ownership and structure of the Registrant’s underling Managing Member of the Registrant (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on April 28, 2014) | |
| 99.5 | Notice to Members regarding certain changes to the trading advisors lineup of the Managing Member of the Registrant (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on May 5, 2015) | |
| 99.6 | Notice to Members regarding certain changes to the trading advisors lineup of the Managing Member of the Registrant (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on January 6, 2016) | |
| 99.7 | Notice to Members regarding the change in service provider (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on January 6, 2016) | |
| 99.8 | Notice to Members regarding the change in the registered public accounting firm (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on April 11, 2016) | |
| 99.9 | Notice to Members regarding the departure of Directors or certain Officers; Election of Directors; Appointment of certain Officers (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on April 13, 2016) | |
| 99.10 | Notice to Members regarding the consolidation of the registrant (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on February 1, 2017) | |
Form 15: Certification and notice of termination of registration under Section 12(g) of the Securities Exchange Act of 1934 or suspension of duty to file reports under Sections 13 and 15(d) of the Securities Exchange Act of 1934
44
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to the Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
[Remainder of page left blank intentionally.]
45
 |
| KMP FUTURES FUND I LLC |
| ANNUAL REPORT |
| December 31, 2016 |
| KMP FUTURES FUND I LLC |
|
|
| TABLE OF CONTENTS |
47
AFFIRMATION OF THE COMMODITY POOL OPERATOR
_______________
To the best of the knowledge and belief of the undersigned, the information contained in the Annual Report for the year ended December 31, 2016 is accurate and complete.
Atinder Jaggi, Director of Fund Administration of the Managing Member,
Kenmar Preferred Investments, LLC
KMP FUTURES FUND I LLC
48
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members of
KMP Futures Fund I LLC
We have audited the accompanying financial statements of KMP Futures Fund I LLC (the Company), which comprise the statement of financial condition, including the condensed schedule of investments, as of December 31, 2016, and the related statements of operations and changes in members’ capital (net asset value) for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of KMP Futures Fund I LLC as of December 31, 2016, and the results of its operations and the changes in its net asset value for the year then ended in conformity with U.S. generally accepted accounting principles.
The supplementary information related to December 31, 2016 on pages 68-83, Supplementary Schedule of Members’ Capital Accounts, has been subjected to audit procedures performed in conjunction with the audit of KMP Futures Fund I LLC’s financial statements. The information is the responsibility of the Company’s management. Our audit procedures included determining whether the information reconciled to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplementary information. In forming our opinion on the supplementary information, we evaluated whether the information, including its form and content, is presented in conformity with CFTC Regulation 4.22. In our opinion, the Supplementary Schedule of Members’ Capital Accounts is fairly stated, in all material respects, in relation to the financial statements as a whole.
Hunt Valley, Maryland
March 30, 2017
49
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members of
KMP Futures Fund I LLC
We have audited the accompanying statement of financial condition, including the condensed schedule of investments of KMP Futures Fund I LLC (the "Company") as of December 31, 2015, and the related statements of operations and changes in members' capital (net asset value) for each of the years in the two-year period ended December 31, 2015. The financial statements are the responsibility of the Company'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 Company 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 Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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, the financial statements referred to above present fairly, in all material respects, the financial position of KMP Futures Fund I LLC as of December 31, 2015 and the results of its operations for each of the years in the two-year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary schedule of members' capital accounts at December 31, 2015 and 2014 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ EisnerAmper LLP
New York, New York
March 23, 2016
50
| KMP FUTURES FUND I LLC |
| STATEMENTS OF FINANCIAL CONDITION |
| December 31, 2016 and 2015 |
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents (see Note 2) | $ | 112,042 | $ | 160,928 | ||||
| Receivable from Managing Member | 77,176 | 162,151 | ||||||
| Investment in securities, at fair value (cost $1,299,967 and $1,312,913 at December 31, 2016 and December 31, 2015, respectively) | 1,299,872 | 1,296,166 | ||||||
| Investment in Affiliated Investment Funds, at fair value (see note 7) | 3,177,260 | 0 | ||||||
| Receivable from Affiliated Investment Funds | 332,400 | 5,987,304 | ||||||
| Other receivables | 2,347 | 0 | ||||||
| Total assets | $ | 5,001,097 | $ | 7,606,549 | ||||
| LIABILITIES | ||||||||
| Management fees payable to Managing Member | $ | 6,969 | $ | 10,314 | ||||
| Accrued expenses payable | 59,708 | 93,634 | ||||||
| Service fees payable | 24,546 | 19,550 | ||||||
| Redemptions payable | 192,384 | 146,795 | ||||||
| Total liabilities | 283,607 | 270,293 | ||||||
| MEMBERS’ CAPITAL (Net Asset Value) | 4,717,490 | 7,336,256 | ||||||
| Total liabilities and members’ capital | $ | 5,001,097 | $ | 7,606,549 | ||||
51
| KMP FUTURES FUND I LLC |
| CONDENSED SCHEDULES OF INVESTMENTS |
| December
31, 2016 and 2015
|
| 2016 | 2015 | |||||||||||||||
| Fair Value as a % of Members’ Capital | Fair Value | Fair Value as a % of Members’ Capital | Fair Value | |||||||||||||
| Investment in securities: | ||||||||||||||||
| Publicly-traded mutual funds: | ||||||||||||||||
| DoubleLine Low Duration Bond Fund Class I (shares 129,857.315 and 129,746.316 at December 31, 2016 and 2015, respectively) | 27.55 | % | 1,299,872 | 17.67 | % | 1,296,166 | ||||||||||
| Total investment in securities (cost $1,299,967 and $1,312,913 at December 31, 2016 and 2015, respectively) | 27.55 | % | $ | 1,299,872 | 17.67 | % | $ | 1,296,166 | ||||||||
| Investment in Affiliated Investment Funds: | ||||||||||||||||
| CTA Choice ISAT | 19.06 | % | $ | 899,239 | 0.00 | % | $ | 0 | ||||||||
| CTA Choice KEY | 48.29 | % | 2,278,021 | 0.00 | % | 0 | ||||||||||
| Total investment in Affiliated Investment Funds | 67.35 | % | $ | 3,177,260 | 0.00 | % | $ | 0 | ||||||||
Proportional Share of Investments of Affiliated Investment Funds:
| December 31, 2016 | ||||||||
| Description | Fair Value as a % of Members’ Capital | Fair Value | ||||||
| Proportional Share of Investments in DoubleLine Low Duration Bond Fund Class I (cost $1,248,371 and shares 124,303.999 at December 31, 2016) | 26.38 | % | $ | 1,244,283 | ||||
52
| KMP FUTURES FUND I LLC |
| STATEMENTS OF OPERATIONS |
| For
the Years Ended December 31, 2016, 2015 and 2014
|
| 2016 | 2015 | 2014 | ||||||||||
| INVESTMENT INCOME | ||||||||||||
| Interest income | $ | 7 | $ | 11 | $ | 292 | ||||||
| Dividend income | 30,498 | 33,653 | 83,095 | |||||||||
| Total investment income | 30,505 | 33,664 | 83,387 | |||||||||
| EXPENSES | ||||||||||||
| Management fees to Managing Member | 183,924 | 254,283 | 293,260 | |||||||||
| Managing Member interest earned on Certain Investment Funds (see Note 4) | 26,794 | 10,326 | 48,806 | |||||||||
| Service fees (see Note 6) | 191,425 | 295,331 | 344,890 | |||||||||
| Operating expenses | 173,899 | 299,555 | 273,908 | |||||||||
| Total expenses | 576,042 | 859,495 | 960,864 | |||||||||
| General and administrative expenses borne by the Managing Member and affiliates | (77,176 | ) | (162,151 | ) | (114,371 | ) | ||||||
| Net expenses | 498,866 | 697,344 | 846,493 | |||||||||
| Net investment (loss) | (468,361 | ) | (663,680 | ) | (763,106 | ) | ||||||
| REALIZED AND UNREALIZED GAIN OR (LOSS) ON INVESTMENTS | ||||||||||||
| Net realized loss on investment in securities | (13,385 | ) | (40,541 | ) | (11,198 | ) | ||||||
| Net change in unrealized appreciation (depreciation) on investment in securities | 16,652 | 57,033 | (1,453 | ) | ||||||||
| Net gain (loss) from investment in securities | 3,267 | 16,492 | (12,651 | ) | ||||||||
| Total gain (loss) from Investments in Affiliated Funds | (1,338,086 | ) | (162,042 | ) | 407,750 | |||||||
| Total gain (loss) on Investments | (1,334,819 | ) | (145,550 | ) | 395,099 | |||||||
| NET (LOSS) | $ | (1,803,180 | ) | $ | (809,230 | ) | $ | (368,007 | ) | |||
53
| KMP FUTURES FUND I LLC |
| STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL (NET ASSET VALUE) |
| For
the Years Ended December 31, 2016, 2015 and 2014
|
| Members’ Capital | ||||
| Members’ capital at December 31, 2013 | $ | 12,923,230 | ||
| Redemptions | (2,362,862 | ) | ||
| Net (loss) for the year ended December 31, 2014 | (368,007 | ) | ||
| Members’ capital at December 31, 2014 | 10,192,361 | |||
| Redemptions | (2,046,875 | ) | ||
| Net (loss) for the year ended December 31, 2015 | (809,230 | ) | ||
| Members’ capital at December 31, 2015 | 7,336,256 | |||
| Redemptions | (815,586 | ) | ||
| Net (loss) for the year ended December 31, 2016 | (1,803,180 | ) | ||
| Members’ capital at December 31, 2016 | $ | 4,717,490 | ||
54
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS
|
| Note 1. | ORGANIZATION |
| A. | General Description of the Company |
KMP Futures Fund I LLC (the “Company”) is a limited liability company organized under the laws of Delaware on November 20, 2006, which commenced operations on January 1, 2007. The Company will terminate on December 31, 2056 unless terminated sooner under the provisions of the limited liability company agreement of the Company (the “Operating Agreement”). The Company was formed to engage in the direct or indirect speculative trading of a diversified portfolio of futures contracts, options on futures contracts and forward currency contracts and may, from time to time, engage in cash and spot transactions. Investors holding interests in the Company are collectively referred to as the “Members” or the “Individual Members”. The fiscal year end of the Company is December 31.
Effective March 17, 2014, the Kenmar Group and the Olympia Group of Companies merged with the GEMS Group. In connection with the merger, certain changes in the corporate structure of the organization have occurred. Kenmar Preferred Investments, L.P. (“Kenmar Preferred” or the “Managing Member”) who is the Managing Member of the Company, converted from a Delaware limited partnership to a Delaware limited liability company. Accordingly, the name changed to Kenmar Preferred Investments, LLC. Kenmar Preferred or Managing Member refers to either Kenmar Preferred Investments, L.P. or Kenmar Preferred Investments, LLC, depending on the applicable period discussed. Kenmar Preferred has been delegated administrative authority over the operations of the Company.
The Company is a reporting company pursuant to the Securities Exchange Act of 1934. Moreover, as a commodity pool, the Company is subject to the record keeping and reporting requirements of the Commodity Futures Trading Commission (“CFTC”) and the National Futures Association (“NFA”). The Company meets the definition of an investment company in accordance with guidance under Accounting Standards Codification Topic 946 “Financial Services – Investment Companies”.
The Company allocates a portion of its net assets (“Allocated Assets”) to commodity Trading Advisors (each, a “Trading Advisor” and collectively, the “Trading Advisors”) through various series of CTA Choice Fund LLC (“CTA Choice”), a Delaware limited liability company, for which such allocations are rebalanced quarterly. Each Trading Advisor manages the portion of the assets of the Company allocated to such Trading Advisor and makes the trading decisions in respect of the assets allocated to such Trading Advisor. The Managing Member may terminate any current Trading Advisor or select new Trading Advisors from time to time in its sole discretion. In the future, the Managing Member may determine to access certain Trading Advisors through separate investee pools.
55
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 1. | ORGANIZATION (CONTINUED) |
| A. | General Description of the Company (Continued) |
Effective March 17, 2014, Clarity Managed Account & Analytics Platform, L.P. changed its name and form of entity to Clarity Managed Account & Analytics Platform, LLC (“Clarity”). Clarity refers to either Clarity Managed Account & Analytics Platform, L.P. or Clarity Managed Account & Analytics Platform, LLC, depending on the applicable period discussed. Clarity, an affiliate of Kenmar Preferred, serves as the managing member for CTA Choice. CTA Choice consists of multiple segregated series, each established pursuant to a separate Certificate of Designation prepared by Clarity. CTA Choice is an “umbrella fund” having multiple series, each of which is referred to as an “Affiliated Investment Fund”. Each Affiliated Investment Fund has its own clearly-defined investment objective and strategies that are implemented by a trading advisor.
Effective March 17, 2014, Kenmar Global Investment Management, L.P. changed its name and form of entity to Kenmar Global Investment Management, LLC (the “Asset Allocator”). Asset Allocator refers to either Kenmar Global Investment Management, L.P. or Kenmar Global Investment Management, LLC, depending on the applicable period discussed. The Asset Allocator, an affiliate of the Managing Member, is the Asset Allocator of CTA Choice. Pursuant to the Asset Allocation Agreements between the Managing Member, the Asset Allocator, and each interestholder, the Asset Allocator determines the trading level of each interestholder’s assets and reallocates among the separate series of CTA Choice as agreed upon with the Trading Advisors. On March 30, 2016, Kenmar Global Investment Management, LLC was put into liquidation effective December 31, 2015, and Clarity was appointed as the Asset Allocator of the Company. While the Asset Allocator receives no fees for such services from the Company, the Asset Allocator is paid management and incentive fees directly from the interestholders pursuant to each interestholder’s Asset Allocation Agreement. The Company pays no management or incentive fees to the Asset Allocator.
Effective May 1, 2015, the Company allocates approximately one-half of its Allocated Assets to each of CTA Choice WTN (“WTN”) and CTA Choice QNTM (“QNTM”), both segregated series of CTA Choice, after fully redeeming from CTA Choice EGLG (“EGLG”). Winton Capital Management Limited (“Winton”) is the Trading Advisor for WTN and manages the assets pursuant to its Diversified Program. Eagle Trading Systems Inc. (“Eagle”) is the Trading Advisor for EGLG and manages the assets pursuant to its Global Program. Quantmetrics Capital Management LLP (“Quantmetrics”) is the Trading Advisor for QNTM and manages the assets pursuant to its QM Multi Strategy Program.
Effective January 1, 2016, the Company allocates approximately one-half of its Allocated Assets to each of CTA Choice ISAT (“ISAT”) and CTA Choice KEY (“KEY”), both segregated series of CTA Choice. Deep Field Capital AG (“Deep Field”) is the Trading Advisor for ISAT and manages the assets pursuant to its Singularity Managed Futures Program. KeyQuant S.A.S (“KeyQuant”) is the Trading Advisor for KEY and manages the assets pursuant to its Key Trends Program.
56
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| A. | Basis of Accounting |
The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Such principles require the Managing Member to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates.
Certain amounts in the financial statements for the years ended December 31, 2015 and 2014 were reclassified to conform with the presentation of the financial statements for the year ended December 31, 2016. The reclassification did not have any material impact on the financial statements.
Investment in securities consists of publicly-traded mutual funds, which are valued using the net asset value on the last day of the period. Realized gains and losses from investment in securities and Affiliated Investment Funds are determined using the identified cost method. Any change in net unrealized gain or loss from the preceding period is reported in the statements of operations. Dividends are recorded on the ex-dividend date.
The Company has elected not to provide a statement of cash flows since substantially all of the Company’s investments are carried at fair value and classified as Level 1 measurements in the fair value hierarchy table or fair value was determined using the practical expedient method. The Company has little or no debt and a statement of changes in Members’ capital (Net Asset Value) is provided.
Consistent with standard business practice in the normal course of business, the Company has provided general indemnifications to the Managing Member, the Trading Advisors and others when they act, in good faith, in the best interests of the Company. The Company is unable to develop an estimate of the maximum potential amount of future payments that could potentially result from any hypothetical future claim, but expects the risk of having to make any payments under these general business indemnifications to be remote.
The Company accounts for financial assets and liabilities using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels: quoted market prices in active markets for identical assets and liabilities (Level 1), inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly (Level 2), and unobservable inputs for the asset or liability (Level 3).
The Company considers its investments in publicly-traded mutual funds to be based on quoted prices in active markets for identical assets (Level 1).
57
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| A. | Basis of Accounting (Continued) |
There are no Level 3 investments on December 31, 2016 or 2015, nor any portion of the interim periods.
The following tables summarize the assets measured at fair value using the fair value hierarchy. The Company’s investments in affiliated investment funds are valued based on the net asset value reported by such funds. By adopting ASU 2015-07, the investments in affiliated investment funds are excluded from the fair value hierarchy below.
| December 31, 2016 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Investment in securities, at fair value | $ | 1,299,872 | $ | 0 | $ | 0 | $ | 1,299,872 | ||||||||
| December 31, 2015 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Investment in securities, at fair value | $ | 1,296,166 | $ | 0 | $ | 0 | $ | 1,296,166 | ||||||||
| B. | Cash and Cash Equivalents |
Cash and cash equivalents include cash and investments in overnight deposits. Interest income, if any, includes interest on cash and overnight deposits. In the event of a financial institution’s insolvency, recovery of cash on deposit may be limited to account insurance or other protections afforded such deposits. The Company has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The Members bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions or redemptions received.
| C. | Income Taxes |
The Company is treated as a partnership for U.S. federal income tax purposes. As such, the Company is not required to provide for, or pay, any U.S. federal or state income taxes. Income tax attributes that arise from its operations are passed directly to the Members. The Company may be subject to other state and local taxes in jurisdictions in which it operates.
The Company appropriately recognizes and discloses uncertain tax provisions in their financial statements. Recognition is permitted for each position if, based on its technical merits, it is “more likely than not” that the position will be upheld under audit by tax authorities. The Managing Member has reviewed the Company’s tax positions for all open years and concluded that no provision for income taxes or expense is required in these financial statements. The Company has elected an accounting policy to classify interest and penalties related to income taxes as interest or other expense. The 2013 through 2016 tax years generally remain subject to examination by U.S. Federal and most tax authorities.
There have been no differences between the tax basis and book basis of assets, liabilities or Members’ capital since inception of the Company.
58
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| D. | Capital Accounts |
The Company accounts for subscriptions, allocations and redemptions on a per Member capital account basis. The Company allocates profits and losses, for both financial and tax reporting purposes to its Members monthly on a pro rata basis based on each Member’s capital in the Company during the month. Distributions (other than redemptions of capital) may be made at the sole discretion of the Managing Member on a pro rata basis in accordance with the Members’ respective capital balances. The Managing Member has not and does not presently intend to make any distributions.
| E. | Interest and Dividends |
Interest is recorded on an accrual basis. Dividends are recorded on the ex-dividend date.
| F. | Redemptions Payable |
For purposes of both financial reporting and calculation of redemption value, Net Asset Value is calculated per each Member’s capital account balance after allocations of net income (loss) to such Member’s account.
| G. | Investment in Affiliated Investment Funds |
The investment in Affiliated Investment Funds is reported at fair value in the Company’s statements of financial condition. As a practical expedient, fair value ordinarily is the fund’s net asset value as determined for the Affiliated Investment Funds in accordance with the fund’s valuation policies and reported at the time of the Company’s valuation by the management of the funds. Generally, the fair value of the Company’s investment in Affiliated Investment Funds represents the amount that the Company could reasonably expect to receive from the Affiliated Investment Funds if the Company’s investment was redeemed at the time of the valuation, based on information reasonably available at the time the valuation is made and that the Company believes to be reliable.
| H. | New Accounting Pronouncement |
In May 2015, the FASB issued Accounting Standards Update No. 2015-07 (“ASU 2015-07”), Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using net asset value per share as a practical expedient. ASU 2015-07 is effective for fiscal years beginning after December 15, 2015. The Managing Member of the Company adopted ASU 2015-07 as of January 1, 2016. The adoption of ASU 2015-07 did not have a material impact on the Company’s financial statements.
59
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 3. | COSTS, FEES AND EXPENSES |
| A. | Operating Expenses |
Operating expenses of the Company are paid for by the Company, subject to an operating expense cap of 1.5% of the Company’s Net Asset Value per annum. Operating expenses include legal, accounting, registrar, transfer and assignment functions, investor communications, printing, and other administrative services.
| B. | Trading Advisor Management and Incentive Fees |
The Company indirectly through its investment in Affiliated Investment Funds pays the following Trading Advisor management fees (based on the Company’s Allocated Assets as of each standard allocation date) and incentive fees for achieving “New High Net Trading Profits”, in the Company’s capital accounts within the Affiliated Investment Funds as defined in their respective advisory agreements:
| Affiliated Investment Fund | Management Fee | Incentive Fee | ||||||
| CTA Choice KEY | 1.00 | % | 20.00 | % | ||||
| CTA Choice ISAT | 0.25 | % | 30.00 | % | ||||
| CTA Choice EGLG * | 2.00 | % | 25.00 | % | ||||
| CTA Choice QNTM** | 1.00 | % | 25.00 | % | ||||
| CTA Choice WTN** | 1.50 | % | 20.00 | % | ||||
* The Company fully redeemed from CTA Choice EGLG as of April 30, 2015.
** The Company fully redeemed from CTA Choice QNTM and CTA Choice WTN as of December 31, 2015.
For the years ended December 31, 2016, 2015 and 2014, the Trading Advisor management fees paid indirectly within each Affiliated Investment Fund based on the Company’s Allocated Assets as of each standard allocation date, totaled $47,179, $150,050 and $186,286 respectively.
For the years ended December 31, 2016, 2015 and 2014, the Trading Advisor incentive fees paid indirectly within the Company’s investment in Affiliated Investment Funds, totaled $31,826, $68,155 and $156,366, respectively.
| C. | Commissions |
The Company, indirectly through the commodity trading activity of the Affiliated Investment Funds, is obligated to pay all floor brokerage expenses, give-up charges and NFA clearing and exchange fees. These activities are reflected within the respective net asset value of each of the Affiliated Investment Funds.
60
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 4. | MANAGING MEMBER AND AFFILIATES |
The Company’s management fees to the Managing Member and operating expense cap are both calculated on the Net Asset Value of the Company at rates of 6.0% and 1.5% per annum, respectively. In addition, the Service Fees, which are paid by the Company, are deducted from the management fee to be paid by the Company to the Managing Member.
The Company invests a portion of the excess cash balances not required for margin through certain investment funds which invest in (i) U.S. government securities (which include any security issued or guaranteed as to principal or interest by the United States), (ii) any certificate of deposit for any of the foregoing, including U.S. treasury bonds, U.S. treasury bills and issues of agencies of the United States government, (iii) corporate bonds or notes, or (iv) other instruments permitted by applicable rules and regulations (collectively, “Certain Investment Funds”). Such excess cash balances were held at US Bancorp Fund Services, LLC as transfer agent for Doubleline Funds, at December 31, 2016 and 2015. The objective is to obtain a rate of return for the Company that balances risk and return relative to the historically low yields on short-term cash deposits with banks and or brokerage firms. There is no guarantee that the Managing Member will be successful in investing the excess cash successfully to obtain a greater yield than available on short-term cash deposits with banks and or brokerage firms. The Managing Member is paid monthly 1/12th of 50% of the first 1% of the positive returns earned on the Company’s investments in Certain Investment Funds. The calculation is based on the Company’s average annualized Net Asset Value, and any losses related to returns on Certain Investment Funds must first be recovered through subsequent positive returns prior to the Managing Member receiving a payment. After the calculation of the amount payable to the Managing Member, the Company will be credited with all additional positive returns (or 100% of any losses) on the Company’s investments in Certain Investment Funds. If at the end of any calendar year, a loss has been incurred on the returns for Certain Investment Funds, then the loss carry forward will reset to zero for the next calendar year with regards to the calculation of the Managing Member’s portion of Certain Investment Fund’s income. For the years ended December 31, 2016, 2015 and 2014, the Managing Member’s portion of interest earned on Certain Investment Funds amounted to $26,794, $10,326 and $48,806, respectively.
The Company pays a monthly administrative services fee to Clarity for risk management and related services with respect to monitoring the Trading Advisors, indirectly through its investment in Affiliated Investment Funds based on their respective beginning of month Allocated Assets. For the years ended December 31, 2016, 2015 and 2014, the administrative services fee earned indirectly totaled $18,599, $26,189 and $26,641, respectively.
| Note 5. | ADMINISTRATOR |
SS&C GlobeOp Financial Services LLC (“SS&C GlobeOp” or the “Administrator”), a Delaware limited liability company, served as the Administrator of the Company through January 31, 2016. The Administrator performs or supervises the performance of services necessary for the operation and administration of the Company (other than making investment decisions), including administrative and accounting services. The Administrator also calculates the Company’s Net Asset Value. In addition, the Administrator maintains certain books and records of the Company, including certain books and records required by CFTC Rule 4.23(a). SS&C GlobeOp also serves as the administrator of the Affiliated Investment Funds. Effective February 1, 2016, Gemini Hedge Fund Services, LLC (“Gemini” or the “Administrator”), a Nebraska limited liability company, was appointed as the Administrator of the Company and the Affiliated Investment Funds.
61
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 5. | ADMINISTRATOR (CONTINUED) |
The Company indirectly pays its pro-rata share of administrator fees through its investment in Affiliated Investment Funds. For the years ended December 31, 2016, 2015 and 2014, the Company indirectly paid administrator fees totaling $40,802, $61,404 and $33,249, respectively.
The Company also pays administrator fees directly to the Administrators. For the years ended December 31, 2016, 2015 and 2014, the Company directly paid the Administrators administrator fees of $8,521, $25,000 and $26,147, respectively.
| Note 6. | SERVICE FEES |
The service fee disclosed in the statements of operations represents the monthly on-going trailing compensation paid to service providers ranging from 1/12th of 3.5% (3.5% per annum) to 1/12th of 4.0% (4.0% per annum) of the beginning of month Net Asset Value of the applicable Member interests. The services fees are paid by the Company and are deducted from the management fee paid to the Managing Member.
| Note 7. | INVESTMENT IN AFFILIATED INVESTMENT FUNDS |
The Company invests a portion of its assets in Affiliated Investment Funds. The Company’s investment in Affiliated Investment Funds represented 67.35% and 0% of the Net Asset Value of the Company at December 31, 2016 and December 31, 2015, respectively. The investment in Affiliated Investment Funds is reported in the Company’s statements of financial condition at fair value. The Company records its proportionate share of income or loss in the statement of operations. The investments are subject to the terms of the organizational and offering documents of the Affiliated Investment Funds.
The following tables summarize the change in net asset value (fair value) of the Company’s investment in Affiliated Investment Funds for the years ended December 31, 2016 and 2015:
| Net Asset Value December 31, 2015 | Purchases | Gain (Loss) | Redemptions | Net Asset Value December 31, 2016 | ||||||||||||||||
| CTA Choice KEY | $ | 0 | $ | 3,673,537 | $ | (39,017 | ) | $ | (1,356,499 | ) | $ | 2,278,021 | ||||||||
| CTA Choice ISAT | 0 | 4,513,065 | (1,299,069 | ) | (2,314,757 | ) | 899,239 | |||||||||||||
| Total | $ | 0 | $ | 8,186,602 | $ | (1,338,086 | ) | $ | (3,671,256 | ) | $ | 3,177,260 | ||||||||
| Net Asset Value December 31, 2014 | Purchases | Gain (Loss) | Redemptions | Net Asset Value December 31, 2015 | ||||||||||||||||
| CTA Choice EGLG | $ | 1,399,957 | $ | 3,501,000 | $ | 256,302 | $ | (5,157,259 | ) | $ | 0 | |||||||||
| CTA Choice QNTM | 0 | 3,035,753 | (311,740 | ) | (2,724,013 | ) | 0 | |||||||||||||
| CTA Choice WTN | 1,133,759 | 4,737,903 | (106,604 | ) | (5,765,058 | ) | 0 | |||||||||||||
| Total | $ | 2,533,716 | $ | 11,274,656 | $ | (162,042 | ) | $ | (13,646,330 | ) | $ | 0 | ||||||||
62
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 7. | INVESTMENT IN AFFILIATED INVESTMENT FUNDS (CONTINUED) |
The Affiliated Investment Funds are redeemable monthly and require a redemption notice of 1-5 days. The Company may make additional contributions to or redemptions from the Affiliated Investment Funds on a standard allocation date. The Affiliated Investment Funds engage in trading commodity futures including agricultural, currency, energy, interest rates and stock indices among other types, foreign currency forward contracts and options on futures contracts.
The Company records its proportionate share of income or loss in the statements of operations.
Prior to May 1, 2015, the Company’s investment in Affiliated Investment Funds was not fully funded, but was subject to additional capital calls up to the full amount of the capital commitment. Effective May 1, 2015, in accordance with the amendment to CTA Choice’s Private Placement Memorandum, the full amount of the Company’s capital contribution to an Affiliated Investment Fund is traded by each Trading Advisor pursuant to its trading strategy at the Affiliated Investment Fund’s investment level factor. An Affiliated Investment Fund’s Investment Level Factor multiplied by the capital contribution of the Company to an Affiliated Investment Fund shall equal the Company’s Investment Level.
An Affiliated Investment Fund’s Investment Level Factor is the trading leverage factor of an Affiliated Investment Fund, as designated by Clarity from time to time for such Affiliated Investment Fund, and reflects the level at which a Trading Advisor is instructed to trade the Affiliated Investment Fund’s assets. Clarity may increase or decrease the Affiliated Investment Fund’s Investment Level Factor in its sole discretion.
The following table sets out the total capital contributions and investment level split between net asset value:
| Total capital contribution December 31, 2016 | Total investment level December 31, 2016 | |||||||
| CTA Choice ISAT | $ | 899,239 | $ | 2,697,717 | ||||
| CTA Choice KEY | 2,278,021 | 2,733,625 | ||||||
| Total | $ | 3,177,260 | $ | 5,431,342 | ||||
The Company did not hold any investment in Affiliated Investment Funds at December 31, 2015. The Company’s investment in Affiliated Investment Funds is subject to the market and credit risks of securities held or sold short by their respective Affiliated Investment Fund. Clarity has established procedures to monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The interest holders within CTA Choice bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received.
63
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 8. | RELATED PARTIES |
The Company reimburses Kenmar Preferred and its affiliates for services it performs for the Company, which include, but are not limited to: management, legal, accounting, registrar, transfer and assignment functions, investor communications, postage, printing, and other administrative services.
The expenses incurred by the Company for services performed by Kenmar Preferred and its affiliates for the Company were as follows:
| 2016 | 2015 | 2014 | ||||||||||
| Management fees to Managing Member | $ | 183,924 | $ | 254,283 | $ | 293,260 | ||||||
| Managing Member interest earned on Certain Investment Funds | 26,794 | 10,326 | 48,806 | |||||||||
| Operating expenses | 69,878 | 107,590 | 81,142 | |||||||||
| 280,596 | 372,199 | 423,208 | ||||||||||
| General and administrative expenses borne by the Managing Member and its affiliates | (77,176 | ) | (162,151 | ) | (114,371 | ) | ||||||
| Total | $ | 203,420 | $ | 210,048 | $ | 308,837 | ||||||
Expenses payable to the Managing Member and its affiliates, which are included in accrued expenses payable in the statements of financial condition as of December 31, 2016 and 2015, were $9,620 and $37,924, respectively.
| Note 9. | SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS |
Investments in the Company are made subject to the terms of the Operating Agreement.
A Member can request and receive redemption of capital, subject to the terms in the Operating Agreement.
| Note 10. | DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS |
No derivative instruments were directly held by the Company as of December 31, 2016 and 2015. Derivative trading activity is conducted within the Affiliated Investment Funds.
The Company’s investment in Affiliated Investment Funds is subject to the market and credit risks of the futures contracts, options on futures contracts, forward currency contracts and other financial instruments held or sold short by them. The Company bears the risk of loss only to the extent of the capital commitment of its investment and, in certain specific circumstances, distributions and redemptions received.
The Company is exposed to various types of risks associated with the derivative instruments and related markets in which it indirectly invests through its investment in Affiliated Investment Funds. These risks include, but are not limited to, risk of loss from fluctuations in the value of derivative instruments held (market risk) and the inability of counterparties to perform under the terms of the Company’s investment activities (credit risk), including investment in Affiliated Investment Funds.
64
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 10. | DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS (CONTINUED) |
The Managing Member has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The Members bear the risk of loss only to the extent of the market value of their respective interests in the Company and, in certain specific circumstances, distributions and redemptions received.
Market Risk
Market risk is influenced by a wide variety of factors, including government programs and policies, political and economic events, the level and volatility of interest rates, foreign currency exchange rates, the diversification effect among derivative instruments, and the liquidity and inherent volatility of the markets in which the Company indirectly invests through its ownership in Affiliated Investment Funds.
Credit Risk
The Managing Member attempts to minimize both credit and market risks by requiring the Company and its Trading Advisors to abide by various trading limitations and policies. The Managing Member monitors compliance with these trading limitations and policies, which include, but are not limited to, executing and clearing all trades with creditworthy counterparties; limiting the amount of margin or premium required for any one commodity or all commodities combined; and generally limiting transactions to contracts which are traded in sufficient volume to permit the taking and liquidating of positions.
| Note 11. | FINANCIAL HIGHLIGHTS |
The following information presents the financial highlights of the Company for the years ended December 31, 2016, 2015 and 2014. This information has been derived from information presented in the financial statements:
| 2016 | 2015 | 2014 | ||||||||||
| Total Return(1),(3) | (25.82 | )% | (9.36 | )% | (1.54 | )% | ||||||
| Total expenses(3) | 8.13 | % | 7.73 | % | 7.99 | % | ||||||
| Net investment loss(2),(3) | (7.63 | )% | (7.36 | )% | (7.20 | )% | ||||||
Total return is calculated based on the change in value of Members’ capital during the period. An individual Member’s total return and ratios may vary from the above total return and ratios based on the timing of subscriptions and redemptions.
| (1) | Includes realized and unrealized gains (losses) on securities transactions. |
| (2) | Represents interest and dividend income less total expenses. |
| (3) | Net of general and administrative expenses borne by the Managing Member and affiliates. |
65
| KMP FUTURES FUND I LLC |
| NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
|
| Note 12. | SUBSEQUENT EVENTS |
From January 1, 2017 through January 31, 2017, there were redemptions of approximately $48,000.
On January 3, 2017, the Board of Directors of Kenmar Preferred, determined to dissolve the Company effective as of the close of business on January 31, 2017 because Kenmar Preferred has determined that Company’s aggregate net assets in relation to its operating expenses make it unreasonable to continue the business of the Company.
Effective February 1, 2017, the Company contributed all of its assets into World Monitor Trust III Series J (“Series J”), a business trust organized under the laws of Delaware, for which KEY, ISAT and CTA Choice FRT, pursuant to its Global Diversified Program, will serve as Trading Advisors.
Members in the Company received a pro rata in-kind distribution of the Series J units effective February 1, 2017, which resulted for all Members in the Company to receive a direct ownership interest in Series J.
The Company filed a Form 15 with the SEC on February 2, 2017, de-registering the interests of the Company under Section 12(g) of the Securities Exchange Act of 1934.
66
67
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| 0240 | $ | 2,866 | $ | 3,864 | $ | 4,263 | ||||||
| 0294 | 5,689 | 7,668 | 8,460 | |||||||||
| 0342 | 20,406 | 27,507 | 30,348 | |||||||||
| 0387 | 2,511 | 3,385 | 3,735 | |||||||||
| 0713 | 90,089 | 121,439 | 133,979 | |||||||||
| 0714 | 113,725 | 153,300 | 169,130 | |||||||||
| 0872 | 8,164 | 11,005 | 12,141 | |||||||||
| 1147 | 0 | 0 | 6,102 | |||||||||
| 2002 | 12,323 | 16,611 | 18,326 | |||||||||
| 3030 | 4,475 | 6,033 | 6,656 | |||||||||
| 3031 | 2,984 | 4,022 | 4,437 | |||||||||
| 003-54888 | 4,078 | 5,497 | 6,065 | |||||||||
| 003-62029 | 4,318 | 5,820 | 6,421 | |||||||||
| 003-96658 | 3,075 | 4,144 | 4,572 | |||||||||
| 003-96876 | 2,847 | 3,837 | 4,234 | |||||||||
| 003-R5408 | 3,396 | 4,578 | 5,051 | |||||||||
| 006-58847 | 0 | 0 | 3,452 | |||||||||
| 006-80371 | 0 | 0 | 2,264 | |||||||||
| 006-R5880 | 3,059 | 4,123 | 4,549 | |||||||||
| 006-R6730 | 3,158 | 4,258 | 4,697 | |||||||||
| 007-R3175 | 1,021 | 1,376 | 1,518 | |||||||||
| 011-87782 | 0 | 21,722 | 23,965 | |||||||||
| 017-R7131 | 4,503 | 6,070 | 6,697 | |||||||||
| 021-R7657 | 0 | 0 | 6,253 | |||||||||
| 022-R3304 | 0 | 0 | 62,546 | |||||||||
| 022-R3861 | 2,879 | 3,880 | 4,281 | |||||||||
| 025-64540 | 0 | 0 | 8,655 | |||||||||
| 028-R7766 | 0 | 0 | 5,564 | |||||||||
| 02G-R1275 | 0 | 2,360 | 2,604 | |||||||||
| 02G-R1737 | 6,668 | 8,988 | 9,916 | |||||||||
| 02G-R1744 | 0 | 3,981 | 4,392 | |||||||||
| 02G-R2412 | 0 | 0 | 3,828 | |||||||||
| 032-96631 | 0 | 23,977 | 26,453 | |||||||||
| 038-39898 | 0 | 15,654 | 17,270 | |||||||||
| 039-81889 | 3,689 | 4,973 | 5,486 | |||||||||
| 03W-06684A | 0 | 10,282 | 11,344 | |||||||||
| 03W-06685 | 0 | 10,282 | 11,344 | |||||||||
| 03W-R0190 | 0 | 0 | 9,151 | |||||||||
| 040-R2844 | 9,937 | 13,395 | 14,778 | |||||||||
| 040-R3424 | 9,055 | 12,206 | 13,467 | |||||||||
| 041-R1546 | 1,930 | 2,602 | 2,870 | |||||||||
| 042-R7189 | 2,166 | 2,920 | 3,221 | |||||||||
| 048-37685 | 16,808 | 22,657 | 24,997 | |||||||||
| 048-42269 | 5,768 | 7,775 | 8,578 | |||||||||
| 048-44878 | 13,429 | 18,103 | 19,972 | |||||||||
| 048-46866 | 3,584 | 4,831 | 5,330 | |||||||||
| 048-96912 | 5,388 | 7,263 | 8,013 | |||||||||
| 048-R1269 | 2,105 | 2,838 | 3,131 | |||||||||
68
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| 048-R1275 | $ | 10,830 | $ | 14,599 | $ | 16,106 | ||||||
| 048-R1309 | 0 | 0 | 30,614 | |||||||||
| 048-R1354 | 17,940 | 24,183 | 26,680 | |||||||||
| 048-R1365 | 6,105 | 8,229 | 9,079 | |||||||||
| 048-R1400 | 12,526 | 16,885 | 18,629 | |||||||||
| 048-R1548 | 7,203 | 9,709 | 10,712 | |||||||||
| 048-R1672 | 6,594 | 8,889 | 9,807 | |||||||||
| 048-R1723 | 2,334 | 3,146 | 3,471 | |||||||||
| 048-R2528 | 0 | 0 | 10,064 | |||||||||
| 048-R2664 | 3,576 | 4,820 | 5,318 | |||||||||
| 048-R2777 | 2,379 | 3,207 | 3,538 | |||||||||
| 048-R4281 | 5,663 | 7,634 | 8,422 | |||||||||
| 048-R4283 | 5,663 | 7,634 | 8,422 | |||||||||
| 048-R5106 | 0 | 0 | 2,454 | |||||||||
| 048-R6024 | 2,269 | 3,059 | 3,374 | |||||||||
| 048-R6037 | 1,881 | 2,536 | 2,798 | |||||||||
| 048-R6045 | 10,181 | 13,724 | 15,141 | |||||||||
| 048-R6108 | 15,585 | 21,008 | 23,178 | |||||||||
| 048-R6301 | 3,153 | 4,251 | 4,690 | |||||||||
| 048-R6472 | 17,537 | 23,640 | 26,081 | |||||||||
| 048-R6957 | 1,340 | 1,806 | 1,992 | |||||||||
| 048-R6958 | 1,340 | 1,806 | 1,992 | |||||||||
| 048-R6987 | 2,371 | 3,197 | 3,527 | |||||||||
| 048-R7024 | 8,082 | 10,894 | 12,019 | |||||||||
| 048-R7074 | 2,951 | 3,978 | 4,389 | |||||||||
| 048-R7144 | 9,223 | 12,432 | 13,716 | |||||||||
| 048-R7169 | 11,316 | 15,254 | 16,829 | |||||||||
| 04W-20993 | 26,131 | 35,224 | 38,861 | |||||||||
| 04W-R8236 | 1,045 | 1,409 | 1,554 | |||||||||
| 051-53113 | 2,830 | 3,815 | 4,209 | |||||||||
| 055-46048 | 0 | 7,241 | 7,988 | |||||||||
| 055-52757 | 0 | 6,164 | 6,800 | |||||||||
| 06R-81472 | 0 | 2,823 | 3,115 | |||||||||
| 072-12398 | 2,313 | 3,117 | 3,439 | |||||||||
| 072-R5204 | 4,673 | 6,299 | 6,949 | |||||||||
| 07N-39955 | 5,534 | 7,459 | 8,230 | |||||||||
| 07T-R1672 | 1,919 | 2,587 | 2,854 | |||||||||
| 07Y-26957 | 0 | 0 | 5,917 | |||||||||
| 07Y-27021 | 6,621 | 8,925 | 9,847 | |||||||||
| 08J-R1925 | 10,192 | 13,739 | 15,157 | |||||||||
| 08J-R3987 | 5,894 | 7,945 | 8,766 | |||||||||
| 08N-22151 | 29,039 | 39,144 | 43,186 | |||||||||
| 08N-R4289 | 0 | 0 | 4,502 | |||||||||
| 08R-00537 | 26,857 | 36,203 | 39,941 | |||||||||
| 08V-R3775 | 0 | 0 | 33,386 | |||||||||
| 0AE-33057 | 4,369 | 5,890 | 6,498 | |||||||||
| 0AE-60907 | 0 | 15,440 | 17,034 | |||||||||
| 0AE-60950 | 13,314 | 17,948 | 19,801 | |||||||||
| 0AE-60986 | 14,317 | 19,299 | 21,292 | |||||||||
69
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| 0AE-61017 | $ | 10,197 | $ | 13,746 | $ | 15,165 | ||||||
| 0AE-R4646 | 0 | 0 | 18,383 | |||||||||
| 0AE-R4662 | 13,172 | 17,755 | 19,589 | |||||||||
| 0AE-R4666 | 4,899 | 6,604 | 7,286 | |||||||||
| 0AE-R5720 | 5,443 | 7,338 | 8,095 | |||||||||
| 0AE-R6231 | 6,260 | 8,438 | 9,310 | |||||||||
| 0AE-R7418 | 2,827 | 3,811 | 4,204 | |||||||||
| 0AE-R7648 | 8,848 | 11,928 | 13,159 | |||||||||
| 0AR-80056 | 4,476 | 6,034 | 6,657 | |||||||||
| 0BB-22646 | 2,352 | 3,171 | 3,498 | |||||||||
| 0BL-R0724 | 1,535 | 2,069 | 2,283 | |||||||||
| 0BX-81333 | 2,149 | 2,896 | 3,195 | |||||||||
| 0BX-R1653 | 1,627 | 2,193 | 2,419 | |||||||||
| 0BX-R4170 | 20,094 | 27,087 | 29,884 | |||||||||
| 0CU-29563 | 3,846 | 5,184 | 5,720 | |||||||||
| 0DS-R1521 | 3,662 | 4,937 | 5,446 | |||||||||
| 0ET-28135 | 0 | 0 | 9,722 | |||||||||
| 0ET-36440 | 0 | 27,930 | 30,814 | |||||||||
| 0ET-80603 | 0 | 5,089 | 5,615 | |||||||||
| 0ET-80714 | 0 | 0 | 31,642 | |||||||||
| 0ET-R0725 | 0 | 20,905 | 23,063 | |||||||||
| 0ET-R3993 | 5,329 | 7,184 | 7,925 | |||||||||
| 0ET-R4033 | 0 | 11,347 | 12,519 | |||||||||
| 0ET-R4199 | 0 | 5,697 | 6,286 | |||||||||
| 0ET-R5008 | 0 | 5,473 | 6,038 | |||||||||
| 0ET-R5313 | 0 | 11,706 | 12,915 | |||||||||
| 0ET-R6021 | 0 | 0 | 24,634 | |||||||||
| 0ET-R6466 | 12,481 | 16,825 | 18,562 | |||||||||
| 0ET-R6485 | 5,701 | 7,685 | 8,478 | |||||||||
| 0ET-R6641 | 0 | 6,738 | 7,434 | |||||||||
| 0EW-17590 | 22,313 | 30,078 | 33,184 | |||||||||
| 0EW-17864 | 0 | 0 | 31,953 | |||||||||
| 0EW-36188 | 18,751 | 25,277 | 27,887 | |||||||||
| 0GS-R7328 | 0 | 0 | 4,420 | |||||||||
| 0GS-R7414 | 1,977 | 2,665 | 2,940 | |||||||||
| 0GS-R7729 | 1,952 | 2,631 | 2,903 | |||||||||
| 0GS-R7730 | 1,952 | 2,631 | 2,903 | |||||||||
| 0GU-R4801 | 2,965 | 3,997 | 4,409 | |||||||||
| 0GU-R4802 | 2,965 | 3,997 | 4,409 | |||||||||
| 0HB-R0221 | 2,322 | 3,131 | 3,454 | |||||||||
| 0HL-R6121 | 0 | 0 | 6,835 | |||||||||
| 0KG-00590 | 0 | 0 | 23,637 | |||||||||
| 0KG-81427 | 15,324 | 20,656 | 22,789 | |||||||||
| 0KL-19899 | 16,114 | 21,722 | 23,965 | |||||||||
| 0KL-R1089 | 37,599 | 50,684 | 55,918 | |||||||||
| 0KL-R1471 | 1,589 | 2,142 | 2,364 | |||||||||
| 0KZ-29257 | 0 | 5,164 | 5,697 | |||||||||
| 0KZ-80278 | 2,149 | 2,896 | 3,195 | |||||||||
| 0KZ-81109 | 0 | 0 | 24,209 | |||||||||
70
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| 0KZ-95910 | $ | 0 | $ | 0 | $ | 7,666 | ||||||
| 0KZ-R1609 | 0 | 0 | 9,608 | |||||||||
| 0KZ-R5101 | 12,757 | 17,196 | 18,971 | |||||||||
| 0KZ-R5490 | 5,155 | 6,949 | 7,666 | |||||||||
| 0KZ-R5506 | 1,959 | 2,640 | 2,913 | |||||||||
| 0KZ-R5507 | 4,051 | 5,461 | 6,025 | |||||||||
| 0KZ-R5515 | 0 | 6,601 | 7,283 | |||||||||
| 0KZ-R5517 | 6,931 | 9,343 | 10,308 | |||||||||
| 0KZ-R5524 | 30,929 | 41,692 | 45,997 | |||||||||
| 0KZ-R5533 | 1,392 | 1,876 | 2,070 | |||||||||
| 0KZ-R5554 | 0 | 7,921 | 8,739 | |||||||||
| 0KZ-R5578 | 1,999 | 2,695 | 2,973 | |||||||||
| 0KZ-R5597 | 10,417 | 14,042 | 15,492 | |||||||||
| 0KZ-R5598 | 5,208 | 7,021 | 7,746 | |||||||||
| 0KZ-R5605 | 2,149 | 2,896 | 3,195 | |||||||||
| 0KZ-R5744 | 3,030 | 4,084 | 4,506 | |||||||||
| 0KZ-R5749 | 5,371 | 7,241 | 7,988 | |||||||||
| 0KZ-R6442 | 2,336 | 3,149 | 3,475 | |||||||||
| 0KZ-R6499 | 1,396 | 1,882 | 2,077 | |||||||||
| 0KZ-R7135 | 1,598 | 2,154 | 2,376 | |||||||||
| 0LK-96103 | 0 | 13,322 | 14,698 | |||||||||
| 0LK-R1277 | 0 | 0 | 2,533 | |||||||||
| 0LX-R4452 | 2,551 | 3,439 | 3,794 | |||||||||
| 0LX-R4453 | 2,551 | 3,439 | 3,794 | |||||||||
| 0ME-52225 | 2,102 | 2,834 | 3,127 | |||||||||
| 0MX-R4467 | 2,678 | 3,610 | 3,983 | |||||||||
| 0NF-17169 | 3,772 | 5,084 | 5,610 | |||||||||
| 0NI-00725 | 26,718 | 36,016 | 39,735 | |||||||||
| 0NK-31023 | 12,411 | 16,730 | 18,458 | |||||||||
| 0NK-31452 | 0 | 2,920 | 3,221 | |||||||||
| 0NK-81744 | 0 | 3,263 | 3,600 | |||||||||
| 0NK-R8298 | 0 | 0 | 1,809 | |||||||||
| 0NL-60667 | 0 | 0 | 7,988 | |||||||||
| 0NL-96845 | 0 | 27,505 | 30,345 | |||||||||
| 0NT-R6104 | 1,538 | 2,073 | 2,287 | |||||||||
| 0PG-54409 | 0 | 0 | 25,583 | |||||||||
| 0PG-55511 | 0 | 0 | 29,525 | |||||||||
| 0PG-R3004 | 0 | 0 | 5,474 | |||||||||
| 0RV-R5046 | 0 | 3,035 | 3,349 | |||||||||
| 0RV-R6922 | 1,282 | 1,727 | 1,906 | |||||||||
| 0RZ-14874 | 0 | 0 | 19,139 | |||||||||
| 0RZ-28638 | 0 | 19,068 | 21,037 | |||||||||
| 0RZ-28705 | 0 | 0 | 6,476 | |||||||||
| 0RZ-R4733 | 530 | 715 | 788 | |||||||||
| 0RZ-R5834 | 0 | 0 | 4,083 | |||||||||
| 0RZ-R5971 | 0 | 0 | 10,942 | |||||||||
| 0SF-66565 | 351 | 473 | 522 | |||||||||
| 0SJ-95340 | 6,755 | 9,106 | 10,046 | |||||||||
| 0SV-14938 | 11,538 | 15,553 | 17,159 | |||||||||
71
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| 0SW-80770 | $ | 1,276 | $ | 1,720 | $ | 1,897 | ||||||
| 0SW-R0437 | 6,327 | 8,529 | 9,410 | |||||||||
| 0SZ-R0966 | 3,589 | 4,838 | 5,337 | |||||||||
| 0SZ-R3481 | 0 | 0 | 6,788 | |||||||||
| 0SZ-R3854 | 6,152 | 8,293 | 9,149 | |||||||||
| 0UC-14915 | 0 | 0 | 57,067 | |||||||||
| 0UC-67480 | 3,682 | 4,963 | 5,475 | |||||||||
| 0UC-R2575 | 0 | 0 | 26,707 | |||||||||
| 0UC-R4009 | 15,613 | 21,046 | 23,220 | |||||||||
| 0UC-R4548 | 34,592 | 46,629 | 51,444 | |||||||||
| 0UQ-22996 | 0 | 194,023 | 214,059 | |||||||||
| 0UQ-23061 | 83,316 | 112,309 | 123,907 | |||||||||
| 0UQ-23109 | 30,615 | 41,268 | 45,530 | |||||||||
| 0UQ-23115 | 11,067 | 14,919 | 16,459 | |||||||||
| 0UQ-23199 | 9,234 | 12,448 | 13,733 | |||||||||
| 0UQ-23283 | 27,681 | 37,313 | 41,167 | |||||||||
| 0UQ-24095 | 38,452 | 51,832 | 57,185 | |||||||||
| 0UQ-25463 | 84,547 | 113,969 | 125,738 | |||||||||
| 0UQ-26649 | 23,699 | 31,946 | 35,245 | |||||||||
| 0UQ-R8463 | 30,080 | 40,547 | 44,734 | |||||||||
| 0UQ-R8473 | 33,601 | 45,294 | 49,972 | |||||||||
| 0VX-06147 | 3,618 | 4,877 | 5,381 | |||||||||
| 0WA-R7033 | 1,341 | 1,808 | 1,995 | |||||||||
| 0WA-R7034 | 1,570 | 2,116 | 2,335 | |||||||||
| 0WD-05550 | 0 | 0 | 30,187 | |||||||||
| 0WD-05571 | 11,298 | 15,229 | 16,802 | |||||||||
| 0WD-05576 | 8,386 | 11,305 | 12,472 | |||||||||
| 0WD-05578 | 0 | 0 | 4,939 | |||||||||
| 0WD-05633 | 4,513 | 6,084 | 6,712 | |||||||||
| 0WD-95330 | 15,064 | 20,306 | 22,403 | |||||||||
| 0WD-95361 | 5,989 | 8,072 | 8,906 | |||||||||
| 0WF-R1177 | 0 | 3,772 | 4,162 | |||||||||
| 0WF-R1272 | 2,051 | 2,764 | 3,050 | |||||||||
| 0WF-R1374 | 1,719 | 2,317 | 2,557 | |||||||||
| 0WF-R1383 | 19,154 | 25,819 | 28,485 | |||||||||
| 0WF-R1490 | 2,466 | 3,324 | 3,668 | |||||||||
| 0WF-R2058 | 1,719 | 2,317 | 2,557 | |||||||||
| 0WF-R4348 | 0 | 0 | 5,657 | |||||||||
| 0WF-R4482 | 7,551 | 10,178 | 11,229 | |||||||||
| 0WF-R4913 | 3,845 | 5,183 | 5,718 | |||||||||
| 0WL-31155 | 7,905 | 10,656 | 11,757 | |||||||||
| 0WL-33574 | 5,181 | 6,985 | 7,706 | |||||||||
| 0WL-35494 | 2,472 | 3,332 | 3,677 | |||||||||
| 0WL-R1440 | 0 | 3,302 | 3,643 | |||||||||
| 0WL-R2635 | 2,863 | 3,860 | 4,258 | |||||||||
| 0WL-R8602 | 0 | 0 | 9,092 | |||||||||
| 0YG-R2844 | 1,122 | 1,513 | 1,669 | |||||||||
| 0ZJ-R7648 | 9,145 | 12,328 | 13,601 | |||||||||
| 0ZT-R2045 | 2,149 | 2,896 | 3,195 | |||||||||
72
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| 1008-6637 | 0 | 15,156 | 16,721 | |||||||||
| 1214-7525 | 4,796 | 6,465 | 7,133 | |||||||||
| 1231-9776 | 2,357 | 3,177 | 3,505 | |||||||||
| 1248-9988 | 0 | 19,308 | 21,302 | |||||||||
| 1488-6596 | 0 | 0 | 5,981 | |||||||||
| 1594-4982 | 11,138 | 15,015 | 16,565 | |||||||||
| 1616-8501 | 0 | 66,307 | 73,154 | |||||||||
| 1691-0716 | 960 | 1,293 | 1,427 | |||||||||
| 1744-6150 | 7,378 | 9,946 | 10,973 | |||||||||
| 1774-5188 | 2,686 | 3,620 | 3,994 | |||||||||
| 1824-2292 | 3,845 | 5,183 | 5,718 | |||||||||
| 1851-2863 | 5,336 | 7,193 | 7,936 | |||||||||
| 1888-5564 | 0 | 5,419 | 5,978 | |||||||||
| 1899-4614 | 0 | 0 | 3,994 | |||||||||
| 2027-7903 | 26,713 | 36,008 | 39,727 | |||||||||
| 2039-0085 | 5,371 | 7,241 | 7,988 | |||||||||
| 2047-0563 | 0 | 0 | 11,860 | |||||||||
| 2053-2386 | 2,563 | 3,455 | 3,812 | |||||||||
| 2072-3333 | 6,397 | 8,624 | 9,514 | |||||||||
| 2280-8463 | 0 | 0 | 15,942 | |||||||||
| 221590186 | 4,481 | 0 | 0 | |||||||||
| 2226-5688 | 2,420 | 0 | 0 | |||||||||
| 2336-1687 | 138,874 | 187,200 | 206,531 | |||||||||
| 2513-0760 | 0 | 3,823 | 4,218 | |||||||||
| 2519-9867 | 0 | 0 | 64,599 | |||||||||
| 2853-3730 | 0 | 0 | 3,987 | |||||||||
| 3148-1251 | 0 | 19,308 | 21,302 | |||||||||
| 3290-1470 | 19,967 | 26,915 | 29,694 | |||||||||
| 3229-6646 | 2,342 | 3,157 | 0 | |||||||||
| 3448-1879 | 4,066 | 5,482 | 6,048 | |||||||||
| 3507-2176 | 0 | 6,465 | 7,133 | |||||||||
| 3600-1313 | 12,517 | 16,873 | 18,616 | |||||||||
| 3669-5510 | 7,109 | 9,583 | 10,572 | |||||||||
| 3689-2586 | 5,103 | 6,878 | 7,589 | |||||||||
| 3691-8461 | 6,438 | 8,678 | 9,575 | |||||||||
| 3717-1545 | 0 | 0 | 10,513 | |||||||||
| 3735-6779 | 9,795 | 13,204 | 14,567 | |||||||||
| 3770-7871 | 1,365 | 1,840 | 2,030 | |||||||||
| 3854-6866 | 6,966 | 9,390 | 10,360 | |||||||||
| 3927-0882 | 1,548 | 2,087 | 2,302 | |||||||||
| 3992-5527 | 26,404 | 35,593 | 39,268 | |||||||||
| 4068-5667 | 134,284 | 181,013 | 199,706 | |||||||||
| 4107-9184 | 3,565 | 4,806 | 5,302 | |||||||||
| 4152-5433 | 5,444 | 7,338 | 8,096 | |||||||||
| 4312-9378 | 2,582 | 3,481 | 3,841 | |||||||||
| 4396-4882 | 0 | 0 | 4,664 | |||||||||
| 4487-6958 | 16,678 | 22,481 | 24,803 | |||||||||
| 4488-9989 | 2,403 | 3,239 | 3,573 | |||||||||
| 4489-2820 | 4,020 | 0 | 0 | |||||||||
| 4495-5570 | 5,772 | 7,780 | 8,584 | |||||||||
| 4498-7558 | 0 | 0 | 7,180 | |||||||||
73
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| 4630-7721 | 5,443 | 7,337 | 8,095 | |||||||||
| 4691-7734 | 0 | 0 | 9,398 | |||||||||
| 4704-3967 | 12,526 | 16,885 | 18,629 | |||||||||
| 4719-1617 | 6,722 | 9,061 | 9,997 | |||||||||
| 4728-1958 | 537 | 724 | 799 | |||||||||
| 4753-0026 | 15,191 | 20,477 | 22,592 | |||||||||
| 4786-1391 | 3,754 | 5,061 | 5,583 | |||||||||
| 4797-2121 | 0 | 0 | 199,706 | |||||||||
| 4812-4625 | 0 | 0 | 32,482 | |||||||||
| 4874-5159 | 3,864 | 5,208 | 0 | |||||||||
| 4901-3493 | 9,780 | 0 | 0 | |||||||||
| 5111-9427 | 0 | 0 | 5,564 | |||||||||
| 5120-8649 | 3,742 | 5,044 | 5,564 | |||||||||
| 5206-8255 | 87,951 | 118,557 | 130,800 | |||||||||
| 5283-0837 | 537 | 724 | 799 | |||||||||
| 5285-4586 | 0 | 0 | 38,889 | |||||||||
| 5286-1712 | 362 | 488 | 539 | |||||||||
| 5304-3294 | 9,090 | 12,254 | 13,519 | |||||||||
| 5362-5567 | 68,855 | 92,816 | 102,401 | |||||||||
| 5495-6358 | 0 | 0 | 2,664 | |||||||||
| 5609-2552 | 0 | 0 | 7,850 | |||||||||
| 5628-2884 | 22,414 | 30,214 | 33,334 | |||||||||
| 5990-5615 | 0 | 13,183 | 14,544 | |||||||||
| 6060-3769 | 85,777 | 115,626 | 127,566 | |||||||||
| 6194-3646 | 0 | 3,331 | 3,674 | |||||||||
| 6236-1623 | 2,100 | 2,831 | 3,123 | |||||||||
| 6368-5186 | 0 | 0 | 11,129 | |||||||||
| 6497-0519 | 1,535 | 2,069 | 2,283 | |||||||||
| 6555-7258 | 9,427 | 12,707 | 14,019 | |||||||||
| 6562-3963 | 6,102 | 8,226 | 9,075 | |||||||||
| 6568-6385 | 1,556 | 2,097 | 2,314 | |||||||||
| 6702-5403 | 3,742 | 5,044 | 5,564 | |||||||||
| 6978-1706 | 6,101 | 8,224 | 9,073 | |||||||||
| 6990-3372 | 3,657 | 4,929 | 5,438 | |||||||||
| 7011-9883 | 2,933 | 3,954 | 4,362 | |||||||||
| 7024-4295 | 1,535 | 2,069 | 2,283 | |||||||||
| 7060-3268 | 7,109 | 9,583 | 10,572 | |||||||||
| 7063-2450 | 21,681 | 29,226 | 32,244 | |||||||||
| 7089-0315 | 0 | 5,419 | 5,978 | |||||||||
| 7187-7559 | 49,158 | 66,265 | 73,107 | |||||||||
| 7238-3657 | 2,336 | 3,149 | 3,475 | |||||||||
| 7337-9650 | 1,365 | 1,840 | 2,030 | |||||||||
| 7429-7789 | 2,686 | 3,620 | 0 | |||||||||
| 7500-1814 | 1,437 | 1,937 | 2,137 | |||||||||
| 7509-8756 | 2,149 | 2,897 | 3,196 | |||||||||
| 7598-8747 | 5,434 | 7,325 | 8,081 | |||||||||
| 7759-3521 | 5,745 | 7,744 | 8,544 | |||||||||
| 8061-2411 | 2,342 | 3,157 | 0 | |||||||||
| 8063-7737 | 0 | 4,541 | 5,010 | |||||||||
| 8067-7027 | 4,094 | 5,519 | 6,089 | |||||||||
| 8178-4177 | 21,201 | 28,579 | 31,531 | |||||||||
74
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| 8263-3675A | $ | 6,223 | $ | 8,389 | $ | 9,255 | ||||||
| 8382-1420 | 0 | 8,405 | 9,273 | |||||||||
| 8577-4908 | 17,919 | 24,155 | 26,650 | |||||||||
| 8625-8649 | 0 | 0 | 2,238 | |||||||||
| 8651-3297 | 0 | 0 | 2,030 | |||||||||
| 8689-0538 | 0 | 0 | 4,766 | |||||||||
| 8702-7677 | 5,204 | 7,015 | 7,740 | |||||||||
| 8870-7381 | 449 | 606 | 668 | |||||||||
| 8908-7803 | 2,342 | 3,157 | 0 | |||||||||
| 8913-7264B | 0 | 37,505 | 41,377 | |||||||||
| ABD-80157 | 5,088 | 6,859 | 7,567 | |||||||||
| ABL-R6207 | 1,132 | 1,526 | 1,684 | |||||||||
| ABL-R6253 | 1,351 | 1,821 | 2,009 | |||||||||
| ABL-R6324 | 935 | 1,260 | 1,390 | |||||||||
| ABN-80777 | 772 | 1,041 | 1,148 | |||||||||
| ABR-81799 | 3,233 | 4,359 | 4,809 | |||||||||
| ABR-R2296 | 2,686 | 3,621 | 3,995 | |||||||||
| ABV-01615 | 6,089 | 8,208 | 9,056 | |||||||||
| ABV-03579 | 4,806 | 6,478 | 7,147 | |||||||||
| ABV-80786 | 5,578 | 7,519 | 8,296 | |||||||||
| ABV-R1938 | 4,444 | 5,990 | 6,609 | |||||||||
| ABV-R2723 | 30,857 | 41,595 | 45,890 | |||||||||
| ADC-R6454 | 11,681 | 15,746 | 17,372 | |||||||||
| ADC-R6612 | 0 | 0 | 6,056 | |||||||||
| AEB-80355 | 1,718 | 2,316 | 2,555 | |||||||||
| AEB-80356 | 0 | 2,316 | 2,555 | |||||||||
| AEB-80674 | 0 | 3,876 | 4,277 | |||||||||
| AEH-R6420 | 7,276 | 9,808 | 10,820 | |||||||||
| AEH-R6484 | 3,005 | 4,051 | 4,470 | |||||||||
| AEH-R6538 | 0 | 6,614 | 7,297 | |||||||||
| AEH-R6540 | 0 | 3,353 | 3,700 | |||||||||
| AEH-R6667 | 2,152 | 2,901 | 3,201 | |||||||||
| AEH-R6750 | 0 | 0 | 2,421 | |||||||||
| AEH-R8164 | 0 | 0 | 2,590 | |||||||||
| AEH-R8184 | 0 | 0 | 136,194 | |||||||||
| AEH-R8380 | 0 | 0 | 10,450 | |||||||||
| AEH-R8405 | 0 | 0 | 5,295 | |||||||||
| AEH-R8432 | 0 | 0 | 11,779 | |||||||||
| AEH-R8470 | 1,617 | 2,180 | 2,405 | |||||||||
| AEH-R8901 | 1,210 | 1,631 | 1,800 | |||||||||
| AEW-23920 | 0 | 0 | 20,593 | |||||||||
| AEW-R8836 | 1,350 | 1,819 | 2,007 | |||||||||
| AFH-81470 | 0 | 0 | 15,575 | |||||||||
| AGC-R6126 | 0 | 0 | 8,230 | |||||||||
| AHW-96100 | 0 | 0 | 94,904 | |||||||||
| AHW-R1986 | 0 | 6,041 | 6,665 | |||||||||
| AHW-R2113 | 0 | 0 | 1,838 | |||||||||
| AHW-R2155 | 0 | 0 | 19,950 | |||||||||
| AHW-R2157 | 0 | 0 | 3,654 | |||||||||
75
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| AHW-R2186 | $ | 0 | $ | 0 | $ | 50,698 | ||||||
| AHW-R2223 | 4,814 | 6,489 | 7,159 | |||||||||
| AHW-R2265 | 0 | 0 | 5,956 | |||||||||
| AHW-R6204 | 0 | 0 | 3,063 | |||||||||
| AHW-R6205 | 0 | 0 | 3,063 | |||||||||
| AJX-11087 | 7,977 | 10,753 | 11,863 | |||||||||
| AQL-R5962 | 3,558 | 4,796 | 5,291 | |||||||||
| AWL-81967 | 2,149 | 2,896 | 3,195 | |||||||||
| AWL-R2701 | 0 | 7,459 | 8,230 | |||||||||
| AWL-R3744 | 0 | 7,775 | 8,578 | |||||||||
| AWS-R1742 | 0 | 6,353 | 7,009 | |||||||||
| AWS-R1793 | 0 | 0 | 5,328 | |||||||||
| AXZ-37917 | 7,957 | 10,726 | 11,833 | |||||||||
| AYH-R2306 | 7,208 | 9,717 | 10,720 | |||||||||
| BBD-00028 | 2,836 | 3,823 | 4,218 | |||||||||
| BBD-00092 | 4,391 | 6,474 | 7,142 | |||||||||
| BBD-00125 | 0 | 11,017 | 12,155 | |||||||||
| BBD-00422 | 1,452 | 1,957 | 2,159 | |||||||||
| BBD-01060 | 3,937 | 5,307 | 5,855 | |||||||||
| BBD-01176 | 2,092 | 2,821 | 3,112 | |||||||||
| BBD-02356 | 0 | 4,618 | 5,095 | |||||||||
| BBD-80053 | 2,515 | 3,391 | 3,741 | |||||||||
| BBD-80081 | 12,582 | 16,960 | 18,712 | |||||||||
| BBD-80091 | 6,081 | 8,197 | 9,043 | |||||||||
| BBD-80207 | 3,856 | 5,198 | 5,734 | |||||||||
| BBD-80269 | 8,491 | 11,446 | 12,628 | |||||||||
| BBD-80286 | 8,326 | 11,223 | 12,382 | |||||||||
| BBD-80349 | 5,839 | 7,871 | 8,684 | |||||||||
| BBD-80411 | 5,354 | 7,218 | 7,963 | |||||||||
| BBD-80420 | 2,685 | 3,619 | 3,993 | |||||||||
| BBD-80703 | 1,845 | 2,487 | 2,744 | |||||||||
| BBD-81259 | 9,573 | 12,905 | 14,237 | |||||||||
| BBD-81320 | 2,858 | 3,853 | 4,251 | |||||||||
| BBD-81321 | 3,459 | 4,663 | 5,144 | |||||||||
| BBD-81373 | 2,306 | 3,109 | 3,430 | |||||||||
| BBD-81458 | 4,794 | 6,462 | 7,130 | |||||||||
| BBD-81589 | 6,981 | 9,411 | 10,382 | |||||||||
| BBD-81606 | 12,779 | 17,227 | 19,006 | |||||||||
| BBD-81618 | 0 | 2,386 | 2,633 | |||||||||
| BBD-81750 | 4,224 | 5,694 | 6,281 | |||||||||
| BBD-81765 | 15,341 | 20,679 | 22,815 | |||||||||
| BEK-00213 | 12,119 | 16,337 | 18,024 | |||||||||
| BEK-80096 | 7,155 | 9,645 | 10,641 | |||||||||
| BEK-80148 | 0 | 1,298 | 1,432 | |||||||||
| BEW-85640 | 1,448 | 1,952 | 2,154 | |||||||||
| BEW-R1997 | 15,584 | 21,007 | 23,177 | |||||||||
| BHF-80405 | 2,703 | 3,644 | 4,020 | |||||||||
| BKR-01125 | 20,096 | 27,090 | 29,887 | |||||||||
| BKR-0197 | 2,585 | 3,484 | 3,844 | |||||||||
76
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| BKR-0216 | $ | 20,509 | $ | 27,647 | $ | 30,501 | ||||||
| BKR-02555 | 0 | 0 | 4,291 | |||||||||
| BKR-0538 | 10,061 | 13,563 | 14,963 | |||||||||
| BKR-07518 | 40,454 | 54,532 | 60,163 | |||||||||
| BKR-0900 | 5,756 | 7,759 | 8,560 | |||||||||
| BKR-09744 | 3,223 | 4,344 | 4,793 | |||||||||
| BKR-09925 | 949 | 1,279 | 1,411 | |||||||||
| BKR-1025 | 12,887 | 17,372 | 19,166 | |||||||||
| BKR-10849 | 2,149 | 2,896 | 3,195 | |||||||||
| BKR-11012 | 1,556 | 2,097 | 2,314 | |||||||||
| BKR-11032 | 4,297 | 5,792 | 6,391 | |||||||||
| BKR-11261 | 0 | 10,328 | 11,395 | |||||||||
| BKR-11272 | 0 | 8,254 | 9,106 | |||||||||
| BKR-11937 | 2,149 | 2,896 | 3,195 | |||||||||
| BKR-11968 | 2,231 | 3,008 | 3,318 | |||||||||
| BKR-12026 | 1,591 | 2,145 | 2,367 | |||||||||
| BKR-12039 | 0 | 0 | 5,660 | |||||||||
| BKR-12182 | 8,319 | 11,213 | 12,371 | |||||||||
| BKR-12662 | 1,254 | 1,690 | 1,865 | |||||||||
| BKR-12664 | 2,399 | 3,233 | 3,567 | |||||||||
| BKR-12798 | 12,014 | 16,195 | 17,867 | |||||||||
| BKR-12836 | 5,406 | 7,288 | 8,040 | |||||||||
| BKR-12863 | 22,986 | 30,984 | 34,184 | |||||||||
| BKR-12865 | 9,627 | 12,977 | 14,317 | |||||||||
| BKR-13037 | 0 | 0 | 1,326 | |||||||||
| BKR-13084 | 1,569 | 2,115 | 2,333 | |||||||||
| BKR-13092 | 2,149 | 2,896 | 3,195 | |||||||||
| BKR-13100 | 5,103 | 6,878 | 7,589 | |||||||||
| BKR-13108 | 2,551 | 3,439 | 3,794 | |||||||||
| BKR-13109 | 9,155 | 12,340 | 13,615 | |||||||||
| BKR-13228 | 2,149 | 2,896 | 3,195 | |||||||||
| BKR-13229 | 2,666 | 3,593 | 3,964 | |||||||||
| BKR-13240 | 2,466 | 3,324 | 3,667 | |||||||||
| BKR-13244 | 3,452 | 4,653 | 5,133 | |||||||||
| BKR-13316 | 18,853 | 25,414 | 28,039 | |||||||||
| BKR-13397 | 2,229 | 3,004 | 3,315 | |||||||||
| BKR-13400 | 2,154 | 2,904 | 3,204 | |||||||||
| BKR-1349 | 0 | 0 | 4,233 | |||||||||
| BKR-13498 | 8,410 | 11,336 | 12,507 | |||||||||
| BKR-13503 | 0 | 0 | 51,617 | |||||||||
| BKR-13516 | 901 | 1,214 | 1,339 | |||||||||
| BKR-13521 | 901 | 1,214 | 1,339 | |||||||||
| BKR-13534 | 2,288 | 3,084 | 3,403 | |||||||||
| BKR-13565 | 0 | 0 | 10,573 | |||||||||
| BKR-13577 | 2,686 | 3,620 | 3,994 | |||||||||
| BKR-13625 | 0 | 0 | 42,810 | |||||||||
| BKR-13724 | 3,265 | 4,401 | 4,855 | |||||||||
| BKR-17214 | 1,535 | 2,069 | 2,283 | |||||||||
| BKR-1917 | 7,778 | 10,485 | 11,568 | |||||||||
77
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| BKR-20541 | $ | 2,192 | $ | 2,955 | $ | 3,260 | ||||||
| BKR-26185 | 3,738 | 5,039 | 5,560 | |||||||||
| BKR-2665 | 9,466 | 12,760 | 14,078 | |||||||||
| BKR-2734 | 1,095 | 1,477 | 1,629 | |||||||||
| BKR-28489 | 5,689 | 7,668 | 8,460 | |||||||||
| BKR-3428 | 0 | 0 | 2,505 | |||||||||
| BKR-4028 | 1,166 | 1,572 | 0 | |||||||||
| BKR-4158 | 2,813 | 3,792 | 4,184 | |||||||||
| BKR-4175 | 8,777 | 11,831 | 0 | |||||||||
| BKR-42110 | 2,000 | 2,696 | 2,975 | |||||||||
| BKR-4388 | 5,292 | 7,134 | 0 | |||||||||
| BKR-4651 | 7,461 | 10,057 | 11,095 | |||||||||
| BKR-4775 | 1,532 | 2,066 | 2,279 | |||||||||
| BKR-49059 | 7,208 | 9,717 | 10,720 | |||||||||
| BKR-5271 | 8,925 | 12,031 | 13,272 | |||||||||
| BKR-57756 | 0 | 0 | 22,827 | |||||||||
| BKR-6039M | 0 | 16,761 | 18,492 | |||||||||
| BKR-66914 | 7,674 | 10,345 | 11,413 | |||||||||
| BKR-6730 | 0 | 0 | 2,564 | |||||||||
| BKR-6743 | 6,538 | 8,813 | 9,724 | |||||||||
| BKR-68040 | 2,870 | 3,869 | 4,269 | |||||||||
| BKR-68650 | 5,371 | 7,241 | 7,988 | |||||||||
| BKR-68946 | 2,830 | 3,815 | 4,209 | |||||||||
| BKR-69858 | 0 | 0 | 7,988 | |||||||||
| BKR-70300 | 21,485 | 28,962 | 31,953 | |||||||||
| BKR-70521 | 16,114 | 21,722 | 23,965 | |||||||||
| BKR-71735 | 9,627 | 12,977 | 14,317 | |||||||||
| BKR-71814 | 5,371 | 7,241 | 7,988 | |||||||||
| BKR-71845 | 3,050 | 4,112 | 4,536 | |||||||||
| BKR-72174 | 0 | 0 | 3,127 | |||||||||
| BKR-72228 | 3,438 | 4,635 | 5,113 | |||||||||
| BKR-72456 | 10,252 | 13,820 | 15,247 | |||||||||
| BKR-72496 | 5,372 | 7,241 | 7,989 | |||||||||
| BKR-72555 | 9,103 | 12,271 | 13,538 | |||||||||
| BKR-72661 | 7,009 | 9,448 | 10,424 | |||||||||
| BKR-72669 | 7,660 | 10,325 | 11,391 | |||||||||
| BKR-72913 | 16,114 | 21,722 | 23,965 | |||||||||
| BKR-72948 | 10,743 | 14,481 | 15,976 | |||||||||
| BKR-73074 | 5,661 | 7,631 | 8,419 | |||||||||
| BKR-73168 | 19,202 | 25,884 | 28,557 | |||||||||
| BKR-73170 | 8,772 | 11,825 | 13,046 | |||||||||
| BKR-73234 | 0 | 0 | 39,941 | |||||||||
| BKR-73241 | 5,129 | 6,914 | 7,627 | |||||||||
| BKR-73244 | 11,157 | 15,039 | 16,592 | |||||||||
| BKR-73246 | 2,471 | 3,331 | 3,674 | |||||||||
| BKR-73257 | 10,743 | 14,481 | 15,976 | |||||||||
| BKR-73304 | 2,229 | 3,004 | 3,315 | |||||||||
| BKR-73350 | 6,123 | 8,254 | 9,106 | |||||||||
| BKR-7350 | 14,104 | 19,012 | 0 | |||||||||
78
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| BKR-7353 | $ | 1,308 | $ | 1,763 | $ | 0 | ||||||
| BKR-73908 | 34,537 | 46,556 | 51,363 | |||||||||
| BKR-73919 | 12,526 | 16,885 | 18,629 | |||||||||
| BKR-73921 | 5,629 | 7,588 | 8,372 | |||||||||
| BKR-73923 | 10,743 | 14,481 | 15,976 | |||||||||
| BKR-73939 | 6,542 | 8,818 | 9,729 | |||||||||
| BKR-74043 | 3,050 | 4,112 | 4,536 | |||||||||
| BKR-74047 | 9,071 | 12,228 | 13,490 | |||||||||
| BKR-7482 | 43,613 | 58,790 | 0 | |||||||||
| BKR-7626 | 4,674 | 6,300 | 0 | |||||||||
| BKR-7826 | 13,567 | 18,288 | 0 | |||||||||
| BKR-7959 | 2,149 | 2,896 | 3,195 | |||||||||
| BKR-80421 | 3,888 | 5,241 | 5,782 | |||||||||
| BKR-8237 | 6,114 | 8,241 | 0 | |||||||||
| BKR-84044 | 7,662 | 10,328 | 11,395 | |||||||||
| BKR-85010 | 9,151 | 12,336 | 13,609 | |||||||||
| BKR-8503 | 12,016 | 16,197 | 0 | |||||||||
| BKR-8847 | 10,386 | 14,000 | 15,446 | |||||||||
| BKR-8893 | 1,139 | 1,535 | 1,694 | |||||||||
| BKR-9722 | 7,664 | 10,331 | 11,398 | |||||||||
| BKR-98869 | 2,383 | 3,212 | 3,543 | |||||||||
| BKR-P0008 | 6,443 | 8,684 | 9,581 | |||||||||
| BKR-P0023 | 6,919 | 9,327 | 10,290 | |||||||||
| BKR-P0024 | 1,990 | 2,683 | 2,960 | |||||||||
| BKR-P0030 | 1,532 | 2,065 | 2,278 | |||||||||
| BKR-P0050 | 24,451 | 32,960 | 36,363 | |||||||||
| BKR-P0058 | 72,512 | 97,745 | 107,839 | |||||||||
| BKR-P0087 | 901 | 1,214 | 1,339 | |||||||||
| BKR-P0089 | 1,591 | 2,145 | 2,367 | |||||||||
| BKR-P0191 | 40,930 | 55,174 | 60,871 | |||||||||
| BKR-P0342 | 3,043 | 4,102 | 4,525 | |||||||||
| BKR-P0839 | 1,351 | 1,821 | 2,009 | |||||||||
| BKR-P1059 | 3,973 | 5,356 | 5,909 | |||||||||
| BKR-P1346 | 901 | 1,214 | 1,339 | |||||||||
| BKR-P1348 | 8,705 | 11,734 | 12,946 | |||||||||
| BKR-P1524 | 1,873 | 2,525 | 2,786 | |||||||||
| BKR-P1917 | 0 | 9,582 | 10,571 | |||||||||
| BKR-P2281 | 6,778 | 10,485 | 11,568 | |||||||||
| BKR-P2877 | 3,294 | 4,440 | 4,899 | |||||||||
| BKR-P3477 | 3,294 | 4,440 | 4,899 | |||||||||
| BKR-P3764 | 2,652 | 3,575 | 3,944 | |||||||||
| BKR-P4130 | 761 | 1,025 | 1,131 | |||||||||
| BKR-P4900 | 1,492 | 2,011 | 2,218 | |||||||||
| BKR-P5706 | 3,201 | 4,315 | 4,760 | |||||||||
| BKR-P6084 | 2,302 | 3,104 | 3,424 | |||||||||
| BKR-P6649 | 1,461 | 1,970 | 2,173 | |||||||||
| BKR-P6727 | 9,782 | 13,187 | 14,548 | |||||||||
| BKR-P7154 | 0 | 11,585 | 12,781 | |||||||||
| BKR-P7265 | 0 | 0 | 10,590 | |||||||||
79
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| BKR-P7350 | $ | 0 | $ | 0 | $ | 20,975 | ||||||
| BKR-P7365 | 5,850 | 7,886 | 8,700 | |||||||||
| BKR-P7483 | 1,341 | 1,808 | 1,995 | |||||||||
| BKR-P8123 | 1,591 | 2,145 | 2,367 | |||||||||
| BKR-P8124 | 3,978 | 5,363 | 5,917 | |||||||||
| BKR-P8518 | 761 | 1,025 | 1,131 | |||||||||
| BKR-P9268 | 2,879 | 3,880 | 4,281 | |||||||||
| BKR-P9387 | 789 | 1,063 | 1,173 | |||||||||
| BLN-01268 | 0 | 0 | 6,951 | |||||||||
| BLN-01307 | 7,247 | 9,769 | 10,778 | |||||||||
| BLN-02885 | 10,012 | 13,497 | 14,890 | |||||||||
| BML-01518 | 2,336 | 3,149 | 3,474 | |||||||||
| BTG-80921 | 6,009 | 8,100 | 8,937 | |||||||||
| BTJ-R2569 | 7,923 | 10,680 | 11,783 | |||||||||
| BTJ-R3259 | 2,876 | 3,877 | 4,277 | |||||||||
| BTJ-R3621 | 6,010 | 8,101 | 8,938 | |||||||||
| BTR-00863 | 0 | 0 | 55,864 | |||||||||
| BYW-80007 | 0 | 0 | 3,407 | |||||||||
| BYW-80008 | 0 | 0 | 1,703 | |||||||||
| BYW-80070 | 0 | 0 | 5,256 | |||||||||
| BYW-80103 | 0 | 0 | 18,313 | |||||||||
| BYW-80190 | 0 | 0 | 5,413 | |||||||||
| BYW-80408 | 0 | 0 | 2,895 | |||||||||
| BYW-80538 | 0 | 0 | 12,354 | |||||||||
| BYW-80658 | 0 | 0 | 5,703 | |||||||||
| BYW-80664 | 0 | 0 | 4,298 | |||||||||
| ECK-80089 | 4,731 | 6,377 | 7,036 | |||||||||
| ECK-80106 | 0 | 7,999 | 8,825 | |||||||||
| ECK-80140 | 1,993 | 2,686 | 2,964 | |||||||||
| ECK-80457 | 2,169 | 2,924 | 3,226 | |||||||||
| ECR-14411 | 5,835 | 7,865 | 8,677 | |||||||||
| ECR-96438 | 3,904 | 5,262 | 5,806 | |||||||||
| ECR-R5725 | 9,509 | 12,818 | 14,142 | |||||||||
| EES-R1115 | 78,096 | 105,273 | 116,144 | |||||||||
| ELS-R4206 | 16,114 | 21,722 | 23,965 | |||||||||
| EPM-81697 | 0 | 0 | 11,819 | |||||||||
| ESF-R0501 | 7,664 | 10,331 | 11,398 | |||||||||
| ESF-R3249 | 0 | 16,596 | 18,310 | |||||||||
| HCG-07447 | 0 | 0 | 5,696 | |||||||||
| HCG-13510 | 0 | 0 | 15,976 | |||||||||
| HCX-R1826 | 0 | 0 | 8,932 | |||||||||
| HCX-R2595 | 0 | 0 | 5,513 | |||||||||
| HFE-80019 | 2,038 | 2,747 | 3,031 | |||||||||
| HNY-95093 | 7,947 | 10,712 | 11,819 | |||||||||
| HQY-R5760 | 30,003 | 40,443 | 44,620 | |||||||||
| JBH-05308 | 4,475 | 6,032 | 6,655 | |||||||||
| JHK-08745 | 7,078 | 9,541 | 10,526 | |||||||||
| JHK-09191 | 2,992 | 4,034 | 4,450 | |||||||||
| JHK-09336 | 0 | 3,957 | 4,365 | |||||||||
80
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| JHK-09784 | $ | 9,212 | $ | 16,507 | $ | 26,800 | ||||||
| JHK-R3165 | 0 | 0 | 3,195 | |||||||||
| JHK-R3171 | 2,237 | 3,016 | 3,327 | |||||||||
| JHK-R3177 | 0 | 0 | 9,321 | |||||||||
| JHK-R3178 | 0 | 8,448 | 9,321 | |||||||||
| JHK-R3179 | 0 | 5,974 | 6,591 | |||||||||
| JHK-R3183 | 0 | 9,310 | 10,271 | |||||||||
| JHK-R3186 | 3,640 | 4,907 | 5,413 | |||||||||
| JHK-R3194 | 0 | 0 | 42,510 | |||||||||
| JHK-R3202 | 5,372 | 7,242 | 7,989 | |||||||||
| JHK-R3207 | 11,001 | 14,829 | 16,361 | |||||||||
| JHK-R3215 | 3,223 | 4,344 | 4,793 | |||||||||
| JHK-R3216 | 2,149 | 2,896 | 3,195 | |||||||||
| JHK-R3237 | 1,926 | 2,596 | 2,864 | |||||||||
| JHK-R3248 | 4,297 | 5,792 | 6,391 | |||||||||
| JHK-R3253 | 0 | 7,408 | 8,173 | |||||||||
| JHK-R3257 | 8,915 | 6,800 | 7,502 | |||||||||
| JHK-R3263 | 0 | 1,526 | 1,684 | |||||||||
| JHK-R3268 | 0 | 3,078 | 3,396 | |||||||||
| JHK-R3269 | 0 | 5,217 | 5,756 | |||||||||
| JHK-R3282 | 2,149 | 2,896 | 3,195 | |||||||||
| JHK-R3344 | 3,223 | 4,344 | 4,793 | |||||||||
| JMM-10285 | 0 | 0 | 23,637 | |||||||||
| JMM-81765 | 0 | 0 | 3,384 | |||||||||
| JPB-80026 | 2,847 | 3,838 | 4,234 | |||||||||
| TBM-26513 | 7,315 | 9,861 | 10,879 | |||||||||
| TBM-26563 | 12,683 | 17,097 | 18,862 | |||||||||
| TBM-29232 | 2,505 | 3,377 | 3,726 | |||||||||
| TBM-R0256 | 30,312 | 40,861 | 45,080 | |||||||||
| TBM-R0369 | 18,780 | 25,316 | 27,930 | |||||||||
| TBM-R0408 | 4,430 | 5,972 | 6,589 | |||||||||
| TBM-R0509 | 13,482 | 18,174 | 20,051 | |||||||||
| TBM-R0661 | 6,160 | 8,304 | 9,162 | |||||||||
| TBM-R0832 | 16,338 | 22,023 | 24,297 | |||||||||
| TBN-R0231 | 0 | 0 | 6,689 | |||||||||
| TBW-80513 | 5,423 | 7,310 | 8,065 | |||||||||
| TBW-R3429 | 2,154 | 2,904 | 3,204 | |||||||||
| TEB-R3621 | 11,512 | 15,519 | 17,121 | |||||||||
| TEB-R4612 | 8,270 | 11,148 | 12,299 | |||||||||
| TEB-R4613 | 15,359 | 20,704 | 22,842 | |||||||||
| TEF-R4885 | 0 | 0 | 20,177 | |||||||||
| TEF-R4911 | 0 | 0 | 64,861 | |||||||||
| TEF-R4924 | 0 | 0 | 13,053 | |||||||||
| TEF-R4925 | 0 | 0 | 1,734 | |||||||||
| TEF-R4939 | 0 | 0 | 17,870 | |||||||||
| TEF-R4961 | 0 | 0 | 1,945 | |||||||||
| TEF-R5143 | 0 | 0 | 5,746 | |||||||||
| TEJ-03915 | 0 | 3,513 | 3,876 | |||||||||
| TES-R1303 | 7,500 | 10,110 | 11,154 | |||||||||
81
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| TES-R1450 | $ | 0 | $ | 3,049 | $ | 3,363 | ||||||
| TES-R1794 | 4,524 | 6,099 | 6,728 | |||||||||
| TEZ-08695 | 7,660 | 10,325 | 11,391 | |||||||||
| TEZ-80199 | 0 | 0 | 9,745 | |||||||||
| TEZ-96151 | 0 | 0 | 38,186 | |||||||||
| TEZ-R0727 | 1,532 | 2,066 | 2,279 | |||||||||
| TEZ-R0953 | 0 | 0 | 13,750 | |||||||||
| TEZ-R2267 | 0 | 0 | 7,372 | |||||||||
| TEZ-R2940 | 2,307 | 3,110 | 3,431 | |||||||||
| TFA-19542 | 0 | 0 | 7,884 | |||||||||
| TFA-R5014 | 7,649 | 10,310 | 11,375 | |||||||||
| TGP-R2202 | 9,573 | 12,904 | 14,237 | |||||||||
| TGP-R2203 | 7,658 | 10,323 | 11,389 | |||||||||
| TGP-R3181 | 0 | 28,257 | 31,175 | |||||||||
| TGP-R3342 | 4,547 | 6,129 | 6,762 | |||||||||
| TGP-R3408 | 3,677 | 4,956 | 5,468 | |||||||||
| TGY-R0400 | 2,094 | 2,823 | 3,115 | |||||||||
| TGY-R0761 | 9,478 | 12,776 | 14,095 | |||||||||
| TGY-R0838 | 0 | 0 | 39,811 | |||||||||
| TGY-R0851 | 1,601 | 2,158 | 2,380 | |||||||||
| TGY-R0857 | 0 | 0 | 28,070 | |||||||||
| TGY-R0883 | 10,372 | 13,981 | 15,425 | |||||||||
| TGY-R0937 | 0 | 4,060 | 4,479 | |||||||||
| TGY-R0979 | 0 | 14,638 | 16,150 | |||||||||
| TGY-R1021 | 1,032 | 1,391 | 1,534 | |||||||||
| TGY-R1022 | 2,277 | 3,070 | 3,387 | |||||||||
| TGY-R1084 | 3,019 | 4,069 | 4,489 | |||||||||
| TGY-R1150 | 0 | 7,097 | 7,830 | |||||||||
| TGY-R1251 | 0 | 0 | 7,871 | |||||||||
| TGY-R1379 | 1,520 | 2,049 | 2,261 | |||||||||
| TGY-R1871 | 5,585 | 7,528 | 8,306 | |||||||||
| TGY-R1886 | 0 | 0 | 5,220 | |||||||||
| TGY-R2063 | 0 | 21,747 | 23,993 | |||||||||
| TGY-R2137 | 0 | 8,143 | 8,984 | |||||||||
| TGY-R2217 | 2,872 | 3,872 | 4,272 | |||||||||
| TGY-R2221 | 1,620 | 2,183 | 2,409 | |||||||||
| TGY-R2387 | 0 | 7,362 | 8,122 | |||||||||
| TGY-R2714 | 0 | 4,388 | 4,841 | |||||||||
| TGY-R2904 | 5,194 | 7,002 | 7,725 | |||||||||
| THC-13923 | 16,114 | 21,722 | 23,965 | |||||||||
| THC-R0181 | 2,149 | 2,896 | 3,195 | |||||||||
| THL-81968 | 2,000 | 2,696 | 2,975 | |||||||||
| THL-R0170 | 12,292 | 16,569 | 18,280 | |||||||||
| THL-R0852 | 3,845 | 5,183 | 5,718 | |||||||||
| THM-02893 | 2,282 | 3,076 | 3,394 | |||||||||
| THT-R1394 | 2,828 | 3,812 | 4,206 | |||||||||
| THU-07377 | 4,503 | 6,070 | 6,697 | |||||||||
| TJC-R1267 | 2,972 | 4,006 | 4,420 | |||||||||
82
| KMP FUTURES FUND I LLC |
| SUPPLEMENTARY SCHEDULE OF MEMBERS’ CAPITAL ACCOUNTS (CONTINUED) |
| December
31, 2016, 2015 and 2014
|
| Member Identification Number | Capital Balance December 31, 2016 | Capital Balance December 31, 2015 | Capital Balance December 31, 2014 | |||||||||
| TJM-R3064 | $ | 1,380 | $ | 1,860 | $ | 2,052 | ||||||
| TJM-R5199 | 5,103 | 6,878 | 7,589 | |||||||||
| TJU-80949 | 2,800 | 3,774 | 4,164 | |||||||||
| TJU-R3826 | 1,100 | 1,482 | 1,635 | |||||||||
| TJU-R7643 | 12,890 | 17,372 | 19,166 | |||||||||
| TKC-81926 | 64,418 | 86,831 | 95,797 | |||||||||
| TKC-96552 | 0 | 0 | 6,987 | |||||||||
| 4,717,490 | 7,336,256 | 10,192,361 | ||||||||||
83
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 31st day of March 2017.
| KMP Futures Fund I LLC | ||||
| By: | Kenmar Preferred Investments, LLC | |||
| Managing Member | ||||
| By: | /s/ Atinder Jaggi | Date: March 31, 2017 | ||
| Atinder Jaggi | ||||
| Director of Fund Administration | ||||
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 Registrant in the capacities indicated on March 31, 2017.
| KMP Futures Fund I LLC | ||||
| By: | Kenmar Preferred Investments, LLC | |||
| Managing Member | ||||
| By: | /s/ Jim Parrish | Date: March 31, 2017 | ||
| Jim Parrish | ||||
| President | ||||
| (Principal Executive Officer) | ||||
| By: | /s/ Atinder Jaggi | Date: March 31, 2017 | ||
| Atinder Jaggi | ||||
| Director of Fund Administration | ||||
| (Principal Financial/Accounting Officer) | ||||
84