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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2018

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 000-55213

CAVENDISH FUTURES FUND LLC

(Exact name of registrant as specified in its charter)

c/o UBS Alternatives LLC

1285 Avenue of the Americas, 20th Floor

New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 713-3234

(Registrant’s telephone number, including area code)

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

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

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

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

As of April 30, 2018, 155,444.039 Limited Liability Company Redeemable Units were outstanding.

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CAVENDISH FUTURES FUND LLC

Form 10-Q

Index

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PART I

Item 1.  Financial Statements

Cavendish Futures Fund LLC

Statements of Financial Condition

See accompanying notes to financial statements and attached financial statements of Sydling WNT Master Fund LLC.

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Cavendish Futures Fund LLC

Statements of Operations and Changes in Members’ Capital

(Unaudited)

See accompanying notes to financial statements and attached financial statements of Sydling WNT Master Fund LLC.

* Represents the changes in Members’ Capital per unit

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Cavendish Futures Fund LLC

Notes to Financial Statements

March 31, 2018

(Unaudited)

1.  General

Cavendish Futures Fund LLC (the “Fund”) is a Delaware limited liability company formed on August 7, 2012.  Trading operations of the Fund commenced on February 19, 2013.  The Fund’s investment objective is to achieve capital appreciation through speculative trading in U.S. and international futures, options on futures and forward markets.  The Fund may also engage in swap and other derivative transactions upon approval of Sydling Futures Management LLC (“Sydling”).  The Fund privately and continuously offers redeemable units of limited liability company interest in the Fund (“Redeemable Units”) to qualified investors and subscriptions are generally accepted monthly.  There is no maximum number of Redeemable Units that may be sold by the Fund.  The Fund invests substantially all of its assets in the Sydling WNT Master Fund LLC (“Master Fund”), also a Delaware limited liability company, which has the same investment objective as the Fund.  The Master Fund’s Statements of Financial Condition, including Condensed Schedules of Investments and Statements of Operations and Changes in Members’ Capital are included herein.  The percentage of the Master Fund’s capital owned by the Fund at March 31, 2018 and December 31, 2017 was 100%.  The performance of the Fund is directly affected by the performance of the Master Fund.

The Fund is member managed for purposes of Delaware law.  Pursuant to the Fund’s limited liability company agreement, as may be amended from time to time (the “LLC Agreement”), the members of the Fund (each, a “Member” and collectively, the “Members”) have appointed Sydling to act as the Fund’s commodity pool operator and trading manager.  Sydling is registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator and a commodity trading advisor and is a member of the National Futures Association (“NFA”) effective August 10, 2011.  Sydling, a wholly owned subsidiary of UBS Alternatives LLC, was formed on August 4, 2011.  UBS Alternatives LLC is a wholly owned subsidiary of UBS Americas Inc.

In the normal course of business, the Fund may enter into contracts that contain a variety of representations that provide indemnification for certain liabilities.  The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred.  However, the Fund has not had any prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

Sydling, on behalf of the Fund, has entered into a selling agreement appointing UBS Financial Services Inc. (“UBS Financial Services”) as selling agent to the Fund.

The Master Fund has entered into a customer agreement appointing UBS Securities LLC (“UBS Securities”) as commodity broker to the Master Fund.

The Fund pays (or causes the Master Fund to pay on its behalf) an ongoing selling agent fee to UBS Financial Services equal to 3.5% per year of the adjusted month-end net assets of the Fund.

BNY Mellon Investment Servicing (US) Inc. serves as administrator of the Fund (the “Administrator”).

Winton Capital Management Limited (the “Advisor”) serves as the trading advisor to the Fund and the Master Fund.

Sydling and each Member share in the profits and losses of the Fund in proportion to the amount of limited liability company interest owned by each except that no Member shall be liable for obligations of the Fund in excess of such member’s capital contribution and profits, if any, net of distributions and losses, if any.

Management has evaluated relevant conditions and events, which are known and reasonable knowable, and has determined that there are no conditions and events that raise substantial doubt about the Fund’s ability to continue as a going concern.

The accompanying financial statements and notes are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. These financial statements should be read in conjunction with the financial statements and notes included in the Fund’s Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (the “SEC”).

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The preparation of financial statements and accompanying notes in conformity with U.S. GAAP requires Sydling to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.

Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.

The Master Fund’s Statements of Financial Condition and Condensed Schedules of Investments as of March 31, 2018 and December 31, 2017 and Statements of Operations and Changes in Members’ Capital for the three months ended March 31, 2018 and 2017 are presented below:

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Sydling WNT Master Fund LLC

Statements of Financial Condition

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Sydling WNT Master Fund LLC

Condensed Schedule of Investments

March 31, 2018

(Unaudited)

Percentages shown represent a percentage of member’s capital as of March 31, 2018.

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Sydling WNT Master Fund LLC

Condensed Schedule of Investments

December 31, 2017

Percentages shown represent a percentage of member’s capital as of December 31, 2017.

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Sydling WNT Master Fund LLC

Statements of Operations and Changes in Member’s Capital

(Unaudited)

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2.              Financial Highlights

Changes in the net asset value per Redeemable Unit for the three months ended March 31, 2018 and 2017 are as follows:

Financial Highlights of the Fund:

Total return and the ratios to average Member’s capital are calculated for investor’s capital taken as a whole.  An individual investor’s capital may vary from these ratios and total return based on the timing of capital transactions.

(a)         Per share operating performance is calculated on a monthly basis by dividing each line item by the outstanding units at month-end prior to the reduction of redeemed units.

(b)         The ratios to average Members’ capital are annualized.  The average Members’ capital used in the above ratios is an average of each month-end Members’ capital during the period. Ratios include the Fund’s share of income and expense allocated from the Master Fund.

(c)          Total return assumes a purchase of an interest in the Fund at the beginning of the period and a sale of the interest on the last day of the period noted. Total return is reflected after all investment-related and operating expenses, including the Advisory and Administrative fees.

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Financial Highlights of the Master Fund:

Total return and the ratios to average Member’s capital are calculated for investor’s capital taken as a whole.  An individual investor’s capital may vary from these ratios and total return based on the timing of capital transactions.

(a)         The ratios to average Member’s capital are annualized.  The average Member’s capital used in the above ratios is an average of each month-end member’s capital during the period.

(b)         Total return is calculated based on a time-weighted rate of return methodology.  Monthly rates of return are compounded to derive the total return reflected above.  Total return is reflected after all investment-related and operating expenses.

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3.              Trading Activities

The Fund was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments.   The Fund invests substantially all of its assets through a “master/feeder” structure. The Fund’s pro rata share of the results of the Master Fund’s trading activities is shown in the Fund’s Statements of Operations and Changes in Members’ Capital.

The customer agreement between the Master Fund and UBS Securities, gives the Master Fund the legal right to net unrealized gains and losses on open futures contracts.  Futures contracts are executed on exchanges and are typically liquidated by entering into offsetting contracts.  The Master Fund nets, for financial reporting purposes, the unrealized gains and losses on open futures contracts on the Master Fund’s Statements of Financial Condition.

All of the commodity interests owned by the Master Fund are held for trading purposes.  The average number of futures contracts traded for the three months ended March 31, 2018 and 2017, based on a monthly calculation, was 6,679 and 6,561, respectively.

The following tables indicate the gross fair values of derivative instruments of the Master Fund’s futures contracts as separate assets and liabilities as of March 31, 2018 and December 31, 2017.

* These amounts are presented as Net unrealized appreciation or (depreciation) on open futures contracts on the Master Fund’s Statements of Financial Condition.

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The following table indicates the trading gains and losses, by market sector, on the Master Fund’s derivative instruments for the three months ended March 31, 2018 and 2017.

** These amounts are presented as “Net Realized and Change in Unrealized Gain/(Loss) from Derivative Instruments” on the Master Fund’s Statements of Operations and Changes in Members’ Capital.

The volume of activity of futures that are presented in the Master Fund’s Condensed Schedule of Investments is consistent with the average monthly activity during the periods ended March 31, 2018 and 2017.

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4.              Fair Value Measurements

Fund’s Investments. The Fund values its investment in the Master Fund at fair value and is represented by the Fund’s proportionate interest in the members’ capital of the Master Fund.

Fund’s and Master Fund’s Fair Value Measurements. FASB Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” (“ASC 820”), defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Valuation techniques, as specified by ASC 820, are used to measure fair value.

All financial instruments at fair value are categorized into one of three fair value hierarchy levels, based upon the lowest level input that is significant to the financial instrument’s fair value measurement in its entirety:

Level 1—Quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Valuation techniques for which all significant inputs are market observable, either directly or indirectly.

Level 3—Valuation techniques which include significant inputs that are not based on observable market data.

The Master Fund recognizes transfers into and out of the levels indicated above at the end of the reporting period.  During the periods ended March 31, 2018 and December 31, 2017, there were no transfers amongst Levels 1, 2 and 3 of the valuation hierarchy.

U.S. GAAP provides guidance in determining whether there has been a significant decrease in the volume and level of activity for an asset or liability when compared with normal market activity for such asset or liability (or similar assets or liabilities).  U.S. GAAP also provides guidance on identifying circumstances that indicate a transaction with regards to such an asset or liability is not orderly.  In its consideration, the Master Fund must consider inputs and valuation techniques used for each class of assets and liabilities.  Judgment is used to determine the appropriate classes of assets and liabilities for which disclosures about fair value measurements are provided.

Fair value measurement disclosure for each class of assets and liabilities requires greater disaggregation than the Master Fund’s line items in the Statement of Financial Condition.  The Master Fund determines the appropriate classes for those disclosures on the basis of the nature and risks of the assets and liabilities and their classification in the fair value hierarchy (i.e., Level 1, Level 2, and Level 3).

For assets and liabilities measured at fair value on a recurring basis during the period, the Master Fund provides quantitative disclosures about the fair value measurements separately for each class of assets and liabilities, as well as a reconciliation of beginning and ending balances of Level 3 assets and liabilities broken down by class.

The Master Fund considers prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1).  The values of non exchange-traded forward, swap and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets from observable inputs (Level 2) and for those contracts that are priced using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). As of and for the periods ended March 31, 2018 and December 31, 2017, the Master Fund did not hold any derivative instruments for which market quotations are not readily available and which are priced by broker-dealers who derive fair values for these assets from observable inputs (Level 2) or that are priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).

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The following is a summary of the Master Fund’s investments at fair value.  The inputs or methodology used for valuing derivative instruments are not necessarily an indication of the risk associated with investing in those derivative instruments.

ASSET TABLE (Unaudited)

LIABILITIES TABLE (Unaudited)

ASSET TABLE

LIABILITIES TABLE

5.              Financial Instrument Risks

In the normal course of business, the Master Fund is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments.  These financial instruments may include futures, forwards and options on futures whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument.  These instruments may be traded on an exchange, a swap execution facility (“SEF”), or over-the-counter (“OTC”).  Exchange-traded instruments are standardized and include futures and certain forward and options contracts.  OTC contracts are negotiated between contracting parties and include certain forward, option and swap contracts.  Certain swap contracts may also be traded on a SEF. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted.  The purchaser of an option may lose the entire premium paid for the option.  The writer, or seller, of an option has unlimited risk.  Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk.  In general, the risks associated with OTC contracts are greater than those associated

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with exchange-traded or SEF traded instruments because of the greater risk of default by the counterparty to an OTC contract.  For the three months ended March 31, 2018 and 2017 the Master Fund traded futures contracts only.

The risk to the Members that have purchased interests in the Master Fund is limited to the amount of their capital contributions to the Master Fund and their share of the Master Fund’s assets and undistributed profits.  This limited liability is a consequence of the organization of the Master Fund as a limited liability company under applicable law.

Market risk is the potential for changes in the value of the financial instruments traded by the Master Fund due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices.  Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded.  The Master Fund is exposed to a market risk equal to the value of futures contracts purchased and unlimited liability on such contracts sold short.

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract.  The Master Fund’s risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and not represented by the contract or notional amounts of the instruments.  The Master Fund has credit risk and concentration risk because the sole counterparty or broker with respect to the Master Fund’s assets is UBS Securities or a UBS affiliate.  Credit risk with respect to exchange-traded instruments is reduced to the extent that through UBS Securities, the Master Fund’s counterparty is an exchange or clearing organization.  Futures contracts are conducted through regulated exchanges which have margin requirements, and are settled in cash on a daily basis, thereby minimizing credit risk.

6.              Significant Accounting Policies

The Fund’s and the Master Fund’s accounting policies are the same and are consistent with the accounting policies in the Fund’s financial statements on Form 10-K for the year ended December 31, 2017.

The Fund and the Master Fund have determined their status as investment companies and as such, follow the accounting and reporting requirements of Accounting Standards Codification (“ASC”) 946, Financial Services — Investment Companies.

Statement of Cash Flows. The Fund is not required to provide a Statement of Cash Flows in accordance with ASC 230 — Statement of Cash Flows.

Investment in Master Fund. The Fund records its investment in the Master Fund at fair value and is represented by the Fund’s proportionate interest in the capital of the Master Fund at March 31, 2018 and December 31, 2017.  Valuation of securities held by the Master Fund is discussed in the Notes to the Master Fund’s financial statements on Form 10-K for the year ended December 31, 2017.  The Fund records its pro rata share of the Master Fund’s income, expenses and realized and unrealized gains and losses.  The performance of the Fund is directly attributable to the performance of the Master Fund.  The Fund records its subscription and withdrawal of the capital account related to its investment in the Master Fund on the transaction date.   The Master Fund will adjust the capital account of the Fund.  Brokerage, clearing and transaction fees are incurred by the Master Fund and are reflected in the pro rata allocation received by the Fund from the Master Fund.

Subscriptions Received in Advance. Subscriptions received in advance represent amounts paid by the non-managing Members for a percentage ownership into the Fund which have not yet been added as Members’ capital as of March 31, 2018 and December 31, 2017. The amount paid is held as cash in the Fund’s escrow account and represents the cash on the Fund’s Statements of Financial Condition.

Redemptions Payable.  Pursuant to ASC Topic 480, Distinguishing Liabilities from Equity, capital withdrawals effective March 31, 2018 and December 31, 2017 have been reflected as redemptions payable in the Statements of Financial Condition.

Income Taxes. The Fund is classified as a partnership for U.S. federal income tax purposes, and the Fund will not pay U.S. federal income tax.  As a result, no income tax liability or expense has been recorded in the financial statements. Each member will be subject to taxation on its share of the Fund’s ordinary income, capital gains and losses.

U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements and requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Master Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority.

Tax positions with respect to tax at the Master Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. Sydling has analyzed the Master Fund’s tax positions for the open tax period and has concluded that no provision is required in the Master Fund’s financial statements.  The Master Fund recognizes interest and penalties,

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if any, related to unrecognized tax benefits as income tax expense in its Statements of Income.  For the periods ended March 31, 2018 and December 31, 2017, the Master Fund did not incur any interest or penalties.

The Master Fund earns interest income on 100% of the average daily equity in the Master Fund’s brokerage account at a rate equal to the monthly average 30-day U.S. Treasury bill rate.

7.              Subsequent Events

Sydling has evaluated the impact of all subsequent events on the Fund through the date of the filing.  Subsequent to March 31, 2018, additional subscriptions were received from the non-managing Members totaling $1,043,200.  Subsequent to March 31, 2018, redemptions of $1,664,974 will be paid to the non-managing Members.  Sydling has determined that there were no additional subsequent events requiring recognition or disclosure in the financial statements.

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

Liquidity and Capital Resources

The Fund does not engage in sales of goods or services. Its only assets are its investment in the Master Fund, cash and receivables from the Master Fund. The Master Fund does not engage in the sale of goods or services. The Master Fund’s only assets are its equity in its trading accounts, consisting of cash, net unrealized appreciation/(depreciation) on open futures contracts and interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Fund, through its investment in the Master Fund. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the first quarter of 2018.

For the three months ended March 31, 2018 and 2017, the Master Fund’s average margin to equity ratio was 8.47% and 11.5%, respectively.

The Fund’s capital consists of the capital contributions of the Members as increased or decreased by income/(loss) from its investment in the Master Fund and by expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

For the three months ended March 31, 2018, the Fund’s capital decreased 4.30% from $183,350,875 to $175,473,188. This decrease was attributable to a net loss from operations of $6,576,842 coupled with redemptions of Redeemable Units resulting in an outflow of $4,694,733, which was partially offset by subscriptions for Redeemable Units totaling $5,428,400. Future redemptions from the Fund could impact the amount of funds available for investment in the Master Fund in subsequent periods.

The Master Fund’s capital consists of the capital contributions of the investors of the Master Fund as increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, withdrawals of interest from the Master Fund and distributions of profits, if any.

For the three months ended March 31, 2018, the Master Fund’s capital decreased 4.30% from $183,350,875 to $175,473,188. This decrease was attributable to a net loss from operations of $7,612,694 coupled with the withdrawal of interest in the Master Fund resulting in an outflow of $5,693,393, which was partially offset by subscriptions for interest in the Master Fund totaling $5,428,400. Future withdrawals from the Master Fund can impact the amount of funds available for investments in commodity contract positions in subsequent periods.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. GAAP requires Sydling to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Sydling believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Fund’s significant accounting policies are described in detail in Note 6. “Significant Accounting Policies.”

The Fund records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains/(losses) and change in net unrealized gains/(losses) in the Statements of Operations and Changes in Members’ Capital.

Results of Operations

During the Fund’s first quarter of 2018, the net asset value per Redeemable Unit decreased 4.66% from $1,185.36 to $1,130.18. The Fund, for its own account, through its investment in the Master Fund, experienced a net trading loss before brokerage fees and related fees in the first quarter of 2018 of $6,576,842. Losses were primarily attributable to the Master Fund’s trading of commodity futures in indices, currencies, metals, grains, non-U.S. interest rates, energy and livestock and were partially offset by gains in U.S. interest rates, softs and lumber.

Most of the losses can be attributed to the sharp increase in equity market volatility in February, which resulted in a dramatic reduction in long equity index positions across the board.  Drivers of negative sentiment in equity markets included a steady increase in U.S. treasury yields, weakness in technology stocks related to tax on repatriated cash, global crack down on cryptocurrencies.   As realized risk went higher than forecast levels, the Fund spent most of February reducing risk. Equity sector risk was reduced by about 60% of the near full risk positions held at the end of 2017. UK FTSE 100 Index, S&P 500 Index and Australian SPI 200 Index futures were among the notable detractors in the first quarter. The Fund held short positions in the Russell 2000 index futures, which generated some gains.

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U.S. interest rates were the top contributor for the fund. U.S. Federal Open Market Committee raised rates 0.25% under the new Federal Reserve chairperson William Powell, as core inflation ticked higher. The Fund held high conviction short positions in Eurodollar futures, which were profitable. Short position in U.S. 5 Yr. and 7 Yr. T-note futures were also profitable as they are sensitive to the moves in Fed Funds Rate.

In foreign exchange, the U.S. dollar declined against the global basket of currencies, which resulted in gains from high conviction long Euro, Mexican Peso and British Pound positions.  However the Fund substantially covered its short Yen positions during the ‘risk off’ period, which resulted in some losses.  The Fund reversed its long Canadian dollar positioning to turn short during the quarter, which resulted in some losses. In its policy statement, the Bank of Canada observed that some monetary policy accommodation was needed to the support growth and keep inflation on target.

The Fund came into the quarter with long Nickel and High Grade Copper positions, which were profitable. Short Silver positions were also profitable as the increase in U.S. rates supported the short positioning.  However, dramatic reduction in London Copper and Aluminum positions led to overall losses from the industrial metals sector.

Among other sectors, soft commodities and lumber generated gains for the Fund. The fund maintained high conviction short positions in sugar and coffee, which ranked among the best markets during this period. Sugar continued on its downtrend from last year. These gains more than offset the losses from position reversal in cocoa as demand improved.

The energy sector had flat attribution as gains from crude oil futures were offset by losses from RBOB Gasoline and Heating Oil.

During the Fund’s first quarter of 2017, the net asset value per Redeemable Unit decreased 0.06% from $1,127.01 to $1,126.37. The Fund, for its own account, through its investment in the Master Fund, experienced a net trading gain before brokerage fees and related fees in the first quarter of 2017 of $2,468,692. Gains were primarily attributable to the Master Fund’s trading of commodity futures in indices, livestock and softs and were partially offset by losses in currencies, energy, metals, non-U.S. interest rates, U.S. interest rates and grains.

Nine out of the ten best performing markets during the first quarter were in the equity indices sector. Gains came from equities around the world with Nasdaq, S&P 500 and Euro Stoxx 50 index futures contributing the most. Market participants were generally optimistic about the outcome of the Dutch election and the polls leading into the first round of voting in France. The Fund deftly managed overall equity sector risk by balancing between high conviction momentum signals and a potentially large exposure to global equity risk factor.

Within fixed income, the Fund had small losses in European and U.S. bond futures contracts. As Eurozone inflation peaked around 2%, market participants were concerned about the prospects of ongoing monetary stimulus in Europe. During the quarter, the Fund reduced long positons and essentially became net short in the sector while experiencing modest losses during the transition.

Within foreign exchange, the U.S. Dollar cooled off against most currencies as the Trump administration could not make progress in the U.S. Congress on the anticipated healthcare reform bill.  Due to the weakness in the U.S. Dollar, the Fund reversed its Japanese Yen positioning from short to long during the quarter. The Fund also increased its long Mexican Peso exposures during the period, which was profitable. Smaller losses came from position reductions in the British Pound, Euro and the Canadian Dollar.

Within metals, long Aluminum positions were among the top ten contributors during the quarter. Gains in Aluminum were sparked by China’s proposal for a 30% reduction in Aluminum production in order to reduce air pollution. In contrast, precious metals were volatile as the Fed rate hike went into effect, resulting in the Fund reducing its short Gold positions which contributed to some losses.  Positions in the crude complex were small as markets were trying to find a balance between OPEC led supply cuts and high inventories in the U.S.

Commodity futures markets are highly volatile. Broad and rapid price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility for profit or loss. The profitability of the Fund (and the Master Fund) depends on the existence of major price trends and the ability of the Advisor to correctly identify those price trends.  Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Fund (and the Master Fund) expects to increase capital through operations.

Clearing and transaction fees are based on the number of round turns made in the Master Fund’s account.  Clearing and transaction fees of the Master Fund for the three months ended March 31, 2018 and 2017 were $67,402 and $45,150.  The increase in clearing and transaction fees for the three months ended March 31, 2018 as compared to the corresponding period in 2017 is a result of an increased number of futures contracts traded in the first quarter of 2018 as compared to the corresponding period in 2017.

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Ongoing selling agent fees are calculated as a percentage of the Fund’s capital account balance at the Master Fund as of the end of each month and are affected by trading performance, subscriptions and redemptions.

Ongoing selling agent fees of the Fund for the three months ended March 31, 2018 and 2017 were $1,614,111 and $1,683,323, respectively.  The decrease in selling agent fees in the three months ended March 31, 2018 as compared to the corresponding period in 2017 is due to a decrease in the Fund’s average capital account balance at the Master Fund.

Advisory fees are calculated as a percentage of the Fund’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions.

Advisory fees of the Fund for the three months ended March 31, 2018 and 2017 were $689,645 and $719,228, respectively.  The calculation of advisory fees for the three months ended March 31, 2018 and 2017 was based on a monthly average net asset value of $183,905,411 and $191,794,258, respectively.  The decrease in advisory fees for the three months ended March 31, 2018 as compared to the corresponding period in 2017 is due to a decrease in the average net assets.

Administrative fees are paid to Sydling for administering the business and affairs of the Fund.  Sydling pays a portion of the administrative fee to the Administrator.  These fees are calculated as a percentage of the Fund’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions.

Administrative fees of the Fund for the three months ended March 31, 2018 and 2017 were $229,882 and $239,743, respectively.  The calculation of administrative fees for the three months ended March 31, 2018 and 2017 was based on a monthly average net asset value of $183,905,411 and $191,794,258, respectively.  The decrease in administrative fees for the three months ended March 31, 2018 as compared to the corresponding period in 2017 is due to a decrease in the average net assets.

Incentive fees to the Advisor are based on the new trading profits generated by the Advisor, paid at the end of each quarter, as defined in the Trading Advisory Agreement among the Master Fund, the Fund, Sydling and the Advisor. There were no incentive fees earned during the three months ended March 31, 2018 and 2017.

In allocating substantially all of the assets of the Fund to the Master Fund, Sydling considers the Advisor’s past performance, trading style, volatility of markets traded and fee requirements. Sydling may modify or terminate the allocation of assets to the Advisor at any time.

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Item 3.       Quantitative and Qualitative Disclosures about Market Risk

All of the Fund’s assets are subject to the risk of trading loss through its investment in the Master Fund.

The Master Fund is a speculative commodity pool. The market sensitive instruments held by the Master Fund are acquired for speculative trading purposes, and all or substantially all of the Fund’s capital is subject to the risk of trading loss through its investment in the Master Fund. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Master Fund’s and the Fund’s main line of business.

The risk to the Members that have purchased Redeemable Units is limited to the amount of their capital contributions to the Fund and their share of Fund assets and undistributed profits.  This limited liability is a consequence of the organization of the Fund as a limited liability company under Delaware law.

Market movements result in frequent changes in the fair value of the Master Fund’s open positions and, consequently, in its earnings and cash balances. The Master Fund’s and the Fund’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 Master Fund’s open contracts and the liquidity of the markets in which the Master Fund trades.

The Master Fund rapidly acquires and liquidates both long and short positions in a range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Master Fund’s past performance is not necessarily indicative of its future results.

Quantifying the Fund’s Trading Value at Risk

The following quantitative disclosures regarding the Master Fund’s and the Fund’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor except for statements of historical fact (such as the terms of particular contracts and the number of market risk sensitive instruments held during or at the end of the reporting period).

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

Exchange maintenance margin requirements have been used by the Master Fund as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to Value at Risk.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. The following tables indicate the trading Value at Risk associated with the Master Fund’s open positions by market category as of March 31, 2018 and December 31, 2017, and the highest, lowest and average value during the three months ended March 31, 2018 and the twelve months ended December 31, 2017. All open position trading risk exposures of the Master Fund have been included in calculating the figures set forth below. There has been no material change in the trading Value at Risk information previously disclosed in the Fund’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

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As of March 31, 2018, the Master Fund’s total capitalization was $175,473,188, and the Fund owned 100% of the Master Fund. The Fund invests substantially all of its assets in the Master Fund. The Master Fund’s Value at Risk as of March 31, 2018 was as follows: