10-Q 1 a13-19731_110q.htm 10-Q

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2013

 

OR

 

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

 

For the transition period from                  to                 

 

Commission File Number 0-54140

 

MAN AHL FUTURESACCESS LLC

(Exact Name of Registrant as specified in its charter)

 

Delaware

 

27-2365025

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer Identification No.)

 

c/o Merrill Lynch Alternative Investments LLC

Four World Financial Center, 11th Floor

250 Vesey Street

New York, New York 10080

(Address of principal executive offices)

(Zip Code)

 

212-449-3517

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

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

 

As of September 30, 2013 29,873,142 units of limited liability company interest were outstanding.

 

 

 


 

MAN AHL FUTURESACCESS LLC

 

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

 

Table of Contents

 

 

 

PAGE

 

 

 

PART I—FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

1

 

 

 

Item 2.

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

18

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

Item 4.

Controls and Procedures

34

 

 

 

PART II—OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

34

 

 

 

Item 1A.

Risk Factors

34

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

 

 

 

Item 3.

Defaults Upon Senior Securities

35

 

 

 

Item 4.

Mine Safety Disclosures

35

 

 

 

Item 5.

Other Information

36

 

 

 

Item 6.

Exhibits

36

 


 

PART I - FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

MAN AHL FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF FINANCIAL CONDITION

(unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2013

 

2012

 

ASSETS:

 

 

 

 

 

Equity in commodity trading accounts:

 

 

 

 

 

Cash (including restricted cash of $2,984,853 for 2013 and $4,091,120 for 2012)

 

$

23,988,652

 

$

33,587,919

 

Net unrealized profit on open futures contracts

 

306,038

 

278,208

 

Net unrealized profit on open forwards contracts

 

691,019

 

837,916

 

Cash

 

350,526

 

509,723

 

Other assets

 

65,007

 

65,058

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

25,401,242

 

$

35,278,824

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ CAPITAL:

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Net unrealized loss on open futures contracts

 

$

247,852

 

$

253,575

 

Net unrealized loss on open forwards contracts

 

1,117,177

 

420,644

 

Brokerage commissions payable

 

29,224

 

6,819

 

Sponsor and Advisory fees payable

 

36,656

 

53,881

 

Redemptions payable

 

898,961

 

783,795

 

Other liabilities

 

438,079

 

334,759

 

 

 

 

 

 

 

Total liabilities

 

2,767,949

 

1,853,473

 

 

 

 

 

 

 

MEMBERS’ CAPITAL:

 

 

 

 

 

Members’ Interest 29,873,142 Units and 38,616,741 Units outstanding, unlimited Units authorized)

 

22,633,293

 

33,425,351

 

Total members’ capital

 

22,633,293

 

33,425,351

 

 

 

 

 

 

 

TOTAL LIABILITIES AND MEMBERS’ CAPITAL

 

$

25,401,242

 

$

35,278,824

 

 

 

 

 

 

 

NET ASSET VALUE PER UNIT:

 

 

 

 

 

 

 

 

 

 

 

Class A

 

$

0.7007

 

$

0.8125

 

Class C

 

$

0.6844

 

$

0.7995

 

Class I

 

$

0.7094

 

$

0.8201

 

Class M

 

$

0.8838

 

$

1.0133

 

Class DT

 

$

0.7832

 

$

0.8912

 

 

See notes to financial statements.

 

1


 

MAN AHL FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

For the three

 

For the three

 

For the nine

 

For the nine

 

 

 

months ended

 

months ended

 

months ended

 

months ended

 

 

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

TRADING PROFIT (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized, net

 

$

(1,010,148

)

$

(31,319

)

$

(1,722,690

)

$

(792,641

)

Change in unrealized, net

 

(592,053

)

726,839

 

(809,877

)

(1,263,617

)

Brokerage commissions

 

(90,192

)

(46,029

)

(231,458

)

(117,730

)

 

 

 

 

 

 

 

 

 

 

Total trading profit (loss), net

 

(1,692,393

)

649,491

 

(2,764,025

)

(2,173,988

)

 

 

 

 

 

 

 

 

 

 

INVESTMENT INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

Interest, net

 

(1,989

)

(1,432

)

(2,375

)

1,024

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Management fee

 

80,735

 

153,190

 

284,773

 

511,057

 

Sponsor fee

 

37,462

 

82,904

 

133,851

 

282,015

 

Other

 

68,222

 

137,288

 

293,429

 

210,736

 

Total expenses

 

186,419

 

373,382

 

712,053

 

1,003,808

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME (LOSS)

 

(188,408

)

(374,814

)

(714,428

)

(1,002,784

)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

(1,880,801

)

$

274,677

 

$

(3,478,453

)

$

(3,176,772

)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER UNIT:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Units outstanding

 

 

 

 

 

 

 

 

 

Class A

 

2,951,755

 

4,776,469

 

3,234,068

 

5,476,294

 

Class C

 

6,588,660

 

12,375,408

 

7,119,950

 

13,311,213

 

Class D*

 

—

 

400,000

 

—

 

400,000

 

Class I

 

225,681

 

1,300,604

 

252,156

 

2,229,751

 

Class M**

 

276,871

 

332,016

 

288,688

 

332,016

 

Class DT

 

22,282,046

 

31,611,581

 

23,820,621

 

33,526,389

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per weighted average Unit

 

 

 

 

 

 

 

 

 

Class A

 

$

(0.0570

)

$

0.0044

 

$

(0.1054

)

$

(0.0646

)

Class C

 

$

(0.0575

)

$

0.0004

 

$

(0.1067

)

$

(0.0691

)

Class D*

 

$

—

 

$

0.0099

 

$

—

 

$

(0.0501

)

Class I

 

$

(0.0576

)

$

0.0251

 

$

(0.1022

)

$

(0.0608

)

Class M**

 

$

(0.0695

)

$

(0.0143

)

$

(0.1350

)

$

(0.0143

)

Class DT

 

$

(0.0584

)

$

0.0069

 

$

(0.0971

)

$

(0.0520

)

 

*Units fully redeemed as of August 31, 2012. (Presentation of weighted average units outstanding and net income (loss) per weighted average units for this share class is for the period January 1, 2012 to August 31, 2012.)

**Units issued on July 1, 2012. Units fully redeemed as of September 30, 2012. Units reissued on December 1, 2012 (Presentation of weighted average units outstanding and net income (loss) per weighted average units for this share class is for the period January 1, 2013 to September 30, 2013 and for the period July 1, 2012 to September 30, 2012.)

 

See notes to financial statements.

 

2


 

MAN AHL FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(unaudited) (in Units)

 

 

 

Members’ Capital
December 31, 2011

 

Subscriptions

 

Redemptions

 

Members’ Capital
September 30, 2012

 

Members’ Capital
December 31, 2012

 

Subscriptions

 

Redemptions

 

Members’ Capital
September 30, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

5,780,511

 

573,170

 

(2,216,041

)

4,137,640

 

3,539,903

 

23,906

 

(1,589,914

)

1,973,895

 

Class C

 

13,274,114

 

2,472,854

 

(7,072,067

)

8,674,901

 

7,915,782

 

179,374

 

(1,951,974

)

6,143,182

 

Class D*

 

400,000

 

—

 

(400,000

)

—

 

—

 

—

 

—

 

—

 

Class I

 

2,841,573

 

33,102

 

(2,546,701

)

327,974

 

307,212

 

—

 

(127,590

)

179,622

 

Class M**

 

—

 

388,524

 

(388,524

)

—

 

286,526

 

30,277

 

(119,796

)

197,007

 

Class DT

 

35,593,094

 

85,093

 

(5,948,527

)

29,729,660

 

26,567,318

 

—

 

(5,187,882

)

21,379,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Units

 

57,889,292

 

3,552,743

 

(18,571,860

)

42,870,175

 

38,616,741

 

233,557

 

(8,977,156

)

29,873,142

 

 

*Units fully redeemed as of August 31, 2012.

**Units issued on July 1, 2012. Units fully redeemed as of September 30, 2012. Units reissued on December 1, 2012.

 

See notes to financial statements.

 

3


 

MAN AHL FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(unaudited)

 

 

 

Members’ Capital
December 31, 2011

 

Subscriptions

 

Redemptions

 

Net
Income(loss)

 

Members’ Capital
September 30, 2012

 

Members’ Capital
December 31, 2012

 

Subscriptions

 

Redemptions

 

Net
Income(loss)

 

Members’ Capital
September 30, 2013

 

Class A

 

$

5,181,526

 

$

502,673

 

$

(1,887,727

)

$

(353,586

)

$

3,442,886

 

$

2,876,217

 

$

19,600

 

$

(1,171,587

)

$

(341,014

)

$

1,383,216

 

Class C

 

11,826,542

 

2,128,717

 

(5,915,145

)

(919,414

)

7,120,700

 

6,328,895

 

133,681

 

(1,498,686

)

(759,632

)

4,204,258

 

Class D*

 

366,807

 

—

 

(346,779

)

(20,028

)

—

 

—

 

—

 

—

 

—

 

—

 

Class I

 

2,560,671

 

30,000

 

(2,180,008

)

(135,497

)

275,166

 

251,937

 

—

 

(98,757

)

(25,758

)

127,422

 

Class M**

 

—

 

395,000

 

(390,239

)

(4,761

)

—

 

290,334

 

31,000

 

(108,235

)

(38,984

)

174,115

 

Class DT

 

34,131,419

 

80,592

 

(5,503,107

)

(1,743,486

)

26,965,418

 

23,677,968

 

—

 

(4,620,621

)

(2,313,065

)

16,744,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Capital

 

$

54,066,965

 

$

3,136,982

 

$

(16,223,005

)

$

(3,176,772

)

$

37,804,170

 

$

33,425,351

 

$

184,281

 

$

(7,497,886

)

$

(3,478,453

)

$

22,633,293

 

 

*Units fully redeemed as of August 31, 2012.

**Units issued on July 1, 2012. Units fully redeemed as of September 30, 2012. Units reissued on December 1, 2012.

 

See notes to financial statements.

 

4


 

MAN AHL FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

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

 

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

 

 

 

Class A

 

Class C

 

Class I

 

Class M

 

Class DT

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value at beginning of period

 

$

0.7576

 

$

0.7418

 

$

0.7662

 

$

0.9520

 

$

0.8415

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(0.0460

)

(0.0450

)

(0.0465

)

(0.0578

)

(0.0512

)

Brokerage commissions

 

(0.0026

)

(0.0026

)

(0.0026

)

(0.0033

)

(0.0029

)

Interest Income, net

 

(0.0001

)

(0.0001

)

(0.0001

)

(0.0001

)

(0.0001

)

Expenses

 

(0.0082

)

(0.0097

)

(0.0076

)

(0.0070

)

(0.0041

)

Net asset value, end of period

 

$

0.7007

 

$

0.6844

 

$

0.7094

 

$

0.8838

 

$

0.7832

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

-7.51

%

-7.74

%

-7.42

%

-7.16

%

-6.93

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Total return after Performance fees

 

-7.51

%

-7.74

%

-7.42

%

-7.16

%

-6.93

%

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Member’s Capital: (a) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

1.14

%

1.38

%

1.04

%

0.76

%

0.52

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Expenses (including Performance fees)

 

1.14

%

1.38

%

1.04

%

0.76

%

0.52

%

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-1.14

%

-1.39

%

-1.04

%

-0.77

%

-0.52

%

 

(a) The ratios to average members’ capital have been annualized. The performance fee ratios are not annualized.

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

 

See notes to financial statements.

 

5


 

MAN AHL FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

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

 

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

 

 

 

Class A

 

Class C

 

Class I

 

Class M

 

Class DT

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value at beginning of period

 

$

0.8125

 

$

0.7995

 

$

0.8201

 

$

1.0133

 

$

0.8912

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(0.0769

)

(0.0752

)

(0.0779

)

(0.0969

)

(0.0858

)

Brokerage commissions

 

(0.0063

)

(0.0062

)

(0.0064

)

(0.0079

)

(0.0070

)

Interest Income, net

 

(0.0001

)

(0.0001

)

(0.0001

)

(0.0001

)

(0.0001

)

Expenses

 

(0.0285

)

(0.0336

)

(0.0263

)

(0.0246

)

(0.0151

)

Net asset value, end of period

 

$

0.7007

 

$

0.6844

 

$

0.7094

 

$

0.8838

 

$

0.7832

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

-13.76

%

-14.40

%

-13.50

%

-12.78

%

-12.12

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Total return after Performance fees

 

-13.76

%

-14.40

%

-13.50

%

-12.78

%

-12.12

%

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Member’s Capital: (a) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

3.58

%

4.33

%

3.28

%

2.46

%

1.72

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Expenses (including Performance fees)

 

3.58

%

4.33

%

3.28

%

2.46

%

1.72

%

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-3.59

%

-4.34

%

-3.29

%

-2.47

%

-1.73

%

 

(a) The ratios to average members’ capital have been annualized. The performance fee ratios are not annualized.

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

 

See notes to financial statements.

 

6


 

MAN AHL FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

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

 

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

 

 

 

Class A

 

Class C

 

Class D*

 

Class I

 

Class M**

 

Class DT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value at beginning of period

 

$

0.8315

 

$

0.8224

 

$

0.8571

 

$

0.8376

 

$

1.0000

 

$

0.9008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit

 

0.0114

 

0.0113

 

0.0151

 

0.0115

 

0.0137

 

0.0123

 

Brokerage commissions

 

(0.0009

)

(0.0009

)

(0.0005

)

(0.0009

)

(0.0010

)

(0.0009

)

Interest Income, net (c)

 

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

Expenses

 

(0.0099

)

(0.0119

)

(0.0048

)

(0.0092

)

(0.0083

)

(0.0052

)

Net asset value, before full redemption

 

0.8321

 

0.8209

 

0.8669

 

0.8390

 

1.0044

 

0.9070

 

Less distribution

 

—

 

—

 

0.8669

 

—

 

1.0044

 

—

 

Net asset value, end of period

 

$

0.8321

 

$

0.8209

 

$

—

 

$

0.8390

 

$

—

 

$

0.9070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

0.07

%

-0.18

%

1.15

%

0.17

%

0.44

%

0.69

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Total return after Performance fees

 

0.07

%

-0.18

%

1.15

%

0.17

%

0.44

%

0.69

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Member’s Capital: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

1.18

%

1.43

%

0.53

%

1.08

%

0.81

%

0.56

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Expenses (including Performance fees)

 

1.18

%

1.43

%

0.53

%

1.08

%

0.81

%

0.56

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-1.19

%

-1.44

%

-0.54

%

-1.09

%

-0.81

%

-0.56

%

 

(a) The ratios to average members’ capital have been annualized. The performance fee ratios are not annualized.

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

(c) Interest income, net is less than $0.0001 per Unit

 

*Units fully redeemed as of August 31, 2012.

**Units fully redeemed as of September 30, 2012.

 

See notes to financial statements.

 

7


 

MAN AHL FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

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

 

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

 

 

 

Class A

 

Class C

 

Class D*

 

Class I

 

Class M**

 

Class DT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value at beginning of period

 

$

0.8964

 

$

0.8909

 

$

0.9170

 

$

0.9011

 

$

1.0000

 

$

0.9589

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit

 

(0.0359

)

(0.0356

)

(0.0336

)

(0.0362

)

0.0137

 

(0.0387

)

Brokerage commissions

 

(0.0021

)

(0.0021

)

(0.0018

)

(0.0021

)

(0.0010

)

(0.0022

)

Interest Income, net (c)

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

(0.0000

)

0.0000

 

Expenses

 

(0.0263

)

(0.0323

)

(0.0147

)

(0.0238

)

(0.0083

)

(0.0110

)

Net asset value, before full redemption

 

0.8321

 

0.8209

 

0.8669

 

0.8390

 

1.0044

 

0.9070

 

Less distribution

 

—

 

—

 

0.8669

 

—

 

1.0044

 

—

 

Net asset value, end of period

 

$

0.8321

 

$

0.8209

 

$

—

 

$

0.8390

 

$

—

 

$

0.9070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

-7.17

%

-7.87

%

-5.46

%

-6.89

%

0.44

%

-5.41

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Total return after Performance fees

 

-7.17

%

-7.87

%

-5.46

%

-6.89

%

0.44

%

-5.41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Member’s Capital: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

3.04

%

3.79

%

1.65

%

2.74

%

0.81

%

1.17

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Expenses (including Performance fees)

 

3.04

%

3.79

%

1.65

%

2.74

%

0.81

%

1.17

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-3.04

%

-3.79

%

-1.64

%

-2.74

%

-0.81

%

-1.17

%

 

(a) The ratios to average members’ capital have been annualized. The performance fee ratios are not annualized.

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

(c) Interest income, net is less than $0.0001 per Unit

 

*Units fully redeemed as of August 31, 2012.

**Units issued on July 1, 2012. Units fully redeemed as of September 30, 2012.

 

See notes to financial statements.

 

8


 

MAN AHL FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Man AHL FuturesAccess LLC (the “Fund”), a Merrill Lynch FuturesAccessSM Program (“FuturesAccess”) fund, was organized under the Delaware Limited Liability Company Act on April 1, 2010 and commenced trading activities on August 1, 2010. The Fund engages in the speculative trading of futures and forward contracts on a wide range of commodities. Man AHL (USA) Ltd. (“Man AHL” or “Trading Advisor”) is the trading advisor of the Fund. The Trading Advisor utilizes the Man AHL Diversified Program (the “Trading Program”) for the Fund.

 

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

 

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

 

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

 

In the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of the Fund as of September 30, 2013 and December 31, 2012 and the results of its operations for the three and nine month

 

9


 

periods ended September 30, 2013 and 2012.  However, the operating results for the interim periods may not be indicative of the results for the full year.

 

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

 

Estimates

 

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

 

Initial Offering and Organizational Costs

 

Organization and Offering costs are amortized against the net asset value over 60 months, beginning with the first month-end after the initial issuance of Units for operational and investor trading purposes. However, for financial reporting purposes, organizational costs, to the extent material, will be shown as deducted from net asset value as of the date of such initial issuance. Initial offering costs, to the extent material, will be amortized over a 12-month period after the initial issuance of Units. Accrued costs incurred for the nine month periods ended September 30, 2013 and 2012 were $9,750 and $9,750, respectively.

 

10


 

2.              CONDENSED SCHEDULES OF INVESTMENTS

 

The Fund’s investments, defined as net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of September 30, 2013 and December 31, 2012 are as follows:

 

September 30, 2013

 

 

 

Long Positions

 

Short Positions

 

Net Unrealized

 

 

 

 

 

Commodity Industry

 

Number of

 

Unrealized

 

Percent of

 

Number of

 

Unrealized

 

Percent of

 

Profit (Loss)

 

Percent of

 

 

 

Sector

 

Contracts/Notional *

 

Profit (Loss)

 

Members’ Capital

 

Contracts/Notional *

 

Profit (Loss)

 

Members’ Capital

 

on Open Positions

 

Members’ Capital

 

Maturity Dates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

77

 

$

36,831

 

0.16

%

(186

)

$

191,048

 

0.84

%

$

227,879

 

1.00

%

October 2013 - March 2014

 

Currencies*

 

11,666,136,137

 

691,019

 

3.05

%

(7,837,508,181

)

(1,108,070

)

-4.90

%

(417,051

)

-1.85

%

October 2013 - December 2013

 

Energy

 

41

 

(87,925

)

-0.39

%

(48

)

44,169

 

0.20

%

(43,756

)

-0.19

%

October 2013 - November 2014

 

Interest rates

 

544

 

148,482

 

0.66

%

(94

)

(42,197

)

-0.19

%

106,285

 

0.47

%

December 2013 - September 2016

 

Metals

 

25

 

(10,770

)

-0.05

%

(86

)

(41,518

)

-0.18

%

(52,288

)

-0.23

%

October 2013 - January 2014

 

Stock indices

 

447

 

(204,951

)

-0.91

%

(31

)

15,910

 

0.07

%

(189,041

)

-0.84

%

October 2013 - February 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total, net

 

 

 

$

572,686

 

2.52

%

 

 

$

(940,658

)

-4.16

%

$

(367,972

)

-1.64

%

 

 

 

December 31, 2012

 

 

 

Long Positions

 

Short Positions

 

Net Unrealized

 

 

 

 

 

Commodity Industry

 

Number of

 

Unrealized

 

Percent of

 

Number of

 

Unrealized

 

Percent of

 

Profit (Loss)

 

Percent of

 

 

 

Sector

 

Contracts/Notional *

 

Profit (Loss)

 

Members’ Capital

 

Contracts/Notional *

 

Profit (Loss)

 

Members’ Capital

 

on Open Positions

 

Members’ Capital

 

Maturity Dates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

34

 

$

(104,054

)

-0.31

%

(117

)

$

86,092

 

0.26

%

$

(17,962

)

-0.05

%

February 2013 - May 2013

 

Currencies*

 

16,168,229,437

 

831,350

 

2.49

%

(12,991,844,377

)

(411,960

)

-1.23

%

419,390

 

1.26

%

January 2013 - March 2013

 

Energy

 

24

 

16,070

 

0.05

%

(29

)

(32,210

)

-0.10

%

(16,140

)

-0.05

%

January 2013 - May 2013

 

Interest rates

 

1,749

 

73,708

 

0.22

%

(242

)

(36,528

)

-0.11

%

37,180

 

0.11

%

March 2013 - September 2017

 

Metals

 

38

 

(19,621

)

-0.06

%

(42

)

(127,383

)

-0.38

%

(147,004

)

-0.44

%

January 2013 - April 2013

 

Stock indices

 

638

 

168,811

 

0.51

%

(5

)

(2,370

)

-0.01

%

166,441

 

0.50

%

January 2013 - May 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total, net

 

 

 

$

966,264

 

2.90

%

 

 

$

(524,359

)

-1.57

%

$

441,905

 

1.33

%

 

 

 

*Currencies are stated in notional amounts.

 

No individual contract’s unrealized profit or loss comprised greater than 5% of Members’ Capital as of September 30, 2013 and December 31, 2012. With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts, netting unrealized losses against unrealized profits as applicable.  Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.

 

11


 

3.              FAIR VALUE OF INVESTMENTS

 

Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes.  The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date.  Profits or losses are realized when contracts are liquidated.  Unrealized profits or losses on open contracts are included in Equity in commodity trading accounts on the Statements of Financial Condition.  Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.

 

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

 

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

 

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

 

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

 

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

 

12


 

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

 

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

 

Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded.  These closing prices are observed through the clearing broker and third party pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.

 

The independent pricing sources obtain market quotations and actual transaction prices for investments that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of investments that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like investments, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.

 

The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.

 

Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of investments with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forward and certain futures contracts.

 

13


 

The Fund’s net unrealized profit (loss) on open forward and futures contracts, by the above fair value hierarchy levels, as of September 30, 2013 and December 31, 2012 are as follows:

 

Net unrealized profit (loss) 

 

 

 

 

 

 

 

 

 

on open contracts

 

Total

 

Level I

 

Level II

 

Level III

 

 

 

 

 

 

 

 

 

 

 

Futures

 

 

 

 

 

 

 

 

 

Long

 

$

(118,333

)

$

(107,948

)

$

(10,385

)

$

—

 

Short

 

176,519

 

216,505

 

(39,986

)

—

 

 

 

$

58,186

 

$

108,557

 

$

(50,371

)

$

—

 

 

 

 

 

 

 

 

 

 

 

Forwards

 

 

 

 

 

 

 

 

 

Long

 

$

691,019

 

$

—

 

$

691,019

 

$

—

 

Short

 

(1,117,177

)

—

 

(1,117,177

)

—

 

 

 

$

(426,158

)

$

—

 

$

(426,158

)

$

—

 

 

 

 

 

 

 

 

 

 

 

September 30, 2013

 

$

(367,972

)

$

108,557

 

$

(476,529

)

$

—

 

 

Net unrealized profit (loss) 

 

 

 

 

 

 

 

 

 

on open contracts

 

Total

 

Level I

 

Level II

 

Level III

 

 

 

 

 

 

 

 

 

 

 

Futures

 

 

 

 

 

 

 

 

 

Long

 

$

128,348

 

$

147,822

 

$

(19,474

)

$

—

 

Short

 

(103,715

)

10,438

 

(114,153

)

—

 

 

 

$

24,633

 

$

158,260

 

$

(133,627

)

$

—

 

 

 

 

 

 

 

 

 

 

 

Forwards

 

 

 

 

 

 

 

 

 

Long

 

$

837,916

 

$

—

 

$

837,916

 

$

—

 

Short

 

(420,644

)

—

 

(420,644

)

—

 

 

 

$

417,272

 

$

—

 

$

417,272

 

$

—

 

 

 

 

 

 

 

 

 

 

 

December 31, 2012

 

$

441,905

 

$

158,260

 

$

283,645

 

$

—

 

 

The Fund’s volume of trading forwards and futures as of the nine month period ended September 30, 2013 and year ended December 31, 2012 are representative of the activity throughout these periods. There were no transfers to or from any level during the three or nine month periods ended September 30, 2013 or the year ended December 31, 2012.

 

14


 

The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of, and the net profits and losses on, derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount, or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2, above.

 

The Fund presents its futures and forward contract amounts gross on the Statement of Financial Condition. The Fund maintains margin deposits and cash collateral with its futures and forward brokers, respectively, in amounts determined by the respective broker. At September 30, 2013 and December 31, 2012, the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statement of Financial Condition as Cash on deposit with Broker and the variation margin on open contracts as unrealized gain or loss on futures or forward contracts, respectively.

 

The following table indicates the trading profits and losses, before brokerage commissions, by type/commodity industry sector, on derivative instruments for each of the three and nine month periods ended September 30, 2013 and 2012:

 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30, 2013

 

September 30, 2013

 

Commodity Industry Sector

 

profit (loss) from trading, net

 

profit (loss) from trading , net

 

 

 

 

 

 

 

Agriculture

 

$

142,019

 

$

340,569

 

Currencies

 

(1,107,438

)

(567,681

)

Energy

 

(63,291

)

(1,046,741

)

Interest rates

 

(479,602

)

(2,806,683

)

Metals

 

(334,203

)

95,564

 

Stock indices

 

240,314

 

1,452,405

 

 

 

 

 

 

 

Total, net

 

$

(1,602,201

)

$

(2,532,567

)

 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30, 2012

 

September 30, 2012

 

Commodity Industry Sector

 

profit (loss) from trading , net

 

profit (loss) from trading, net

 

 

 

 

 

 

 

Agriculture

 

$

300,467

 

$

256,800

 

Currencies

 

567,537

 

(732,868

)

Energy

 

(766,638

)

(748,300

)

Interest rates

 

1,131,402

 

1,298,591

 

Metals

 

(534,369

)

(1,441,069

)

Stock indices

 

(2,879

)

(689,412

)

 

 

 

 

 

 

Total, net

 

$

695,520

 

$

(2,056,258

)

 

15


 

The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, RBS, MLPF&S or other BAC entities.  Fund assets could be lost or impounded during lengthy bankruptcy proceedings.  Were a substantial portion of the Fund’s capital tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities.  There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to “customer funds” deposited with regulated dealers and brokers.

 

4.              MARKET AND CREDIT RISKS

 

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

 

Market Risk

 

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

 

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

 

Credit Risk

 

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

 

The credit risk associated with these instruments from counterparty nonperformance is the net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition. MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with

 

16


 

BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund, including engaging RBS as an OTC prime broker.

 

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

 

Indemnifications

 

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

 

5.              RELATED PARTY TRANSACTIONS

 

MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the “Transfer Agent”), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the quarter ended September 30, 2013, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed/sponsored funds including the Fund on a monthly basis based on each Fund’s net assets. The Transfer Agent fee allocated to the Fund for the three month periods ended September 30, 2013, and 2012 amounted to $1,521 and $1,995, respectively. The Transfer Agent fee allocated to the Fund for the nine month periods ended September 30, 2013, and 2012 amounted to $4,697 and $7,292, respectively, of which $884 and $980 was payable to the Transfer Agent as of September 30, 2013 and December 31, 2012, respectively.

 

Sponsor fees as presented on the Statement of Operations are paid to related parties for the three and nine month periods ended September 30, 2013, and 2012. Of the $90,192 of brokerage commissions presented on the Statement of Operations for the three month period ended September 30, 2013, $90,192 was expensed to related parties; and of the $1,989 of net interest expense presented on the Statement of Operations, $2,248 was expensed from cash held in commodity trading accounts held with related parties. Of the $231,458 of brokerage commissions presented on the Statement of Operations for the nine month period ended September 30, 2013, $231,458 was expensed to related parties; and of the $2,375 of net interest expense presented on the Statement of Operations, $3,084 was expensed from cash held in commodity trading accounts held with related parties. As of September 30, 2013, of the equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statement of Financial Condition, $22,827,755 in cash and $379,350 net unrealized loss are held with related parties. Of the $46,029 of brokerage commissions presented on the Statement of Operations for the three month period ended September 30, 2012, $45,909 was expensed to related parties; and of the $1,432 of net interest expense presented on the Statement of Operations, $1,450 was expensed from cash held in commodity trading accounts held with related parties. Of the $117,730 of brokerage commissions presented on the Statement of Operations for the nine month period ended September 30, 2012, $117,610

 

17


 

was expensed to related parties; and of the $1,024 of net interest income presented on the Statement of Operations, $1,006 was earned from cash held in commodity trading accounts held with related parties. At December 31 2012, of the equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statement of Financial Condition, $33,159,228 in cash and $547,428 net unrealized profit are held with related parties.

 

6.              RECENT ACCOUNTING PRONOUNCEMENTS

 

In June 2013, the Financial Accounting Standards Board (“FASB”) issued an update relating to the criteria used in defining an investment company under US GAAP. It also sets forth certain measurement and disclosure requirements.   Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a noncontrolling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Fund’s financial statements.

 

7.              SUBSEQUENT EVENTS

 

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

 

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

 

MONTH-END NET ASSET VALUE PER UNIT

 

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

 

The Fund calculates the Net Asset Value per Unit of each Class of Units as of the close of business on the last calendar day of each month and any other dates MLAI may determine in its discretion (each, a “Calculation Date”). The Fund’s “Net Asset Value” as of any Calculation Date generally equals the value of the Fund’s account under the management of the Trading Advisor as of that date, plus any other assets held by the Fund, minus accrued Sponsor’s, management and performance fees, trading liabilities, including brokerage commissions, any offering or operating costs, amortized organizational and initial offering costs and all other liabilities of the Fund.  MLAI or its delegates are authorized to make all Net Asset Value determinations.

 

18


 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

Jun.

 

Jul.

 

Aug.

 

Sep.

 

2012

 

$

0.8835

 

$

0.9009

 

$

0.8631

 

$

0.8601

 

$

0.8615

 

$

0.8315

 

$

0.8623

 

$

0.8390

 

$

0.8321

 

2013

 

$

0.8274

 

$

0.8208

 

$

0.8380

 

$

0.8689

 

$

0.8010

 

$

0.7576

 

$

0.7392

 

$

0.7173

 

$

0.7007

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

Jun.

 

Jul.

 

Aug.

 

Sep.

 

2012

 

$

0.8774

 

$

0.8939

 

$

0.8557

 

$

0.8521

 

$

0.8527

 

$

0.8224

 

$

0.8520

 

$

0.8284

 

$

0.8209

 

2013

 

$

0.8135

 

$

0.8063

 

$

0.8226

 

$

0.8521

 

$

0.7850

 

$

0.7418

 

$

0.7232

 

$

0.7011

 

$

0.6844

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

Jun.

 

Jul.

 

Aug.

 

Sep.

 

2012

 

$

0.9049

 

$

0.9239

 

$

0.8863

 

$

0.8844

 

$

0.8869

 

$

0.8571

 

$

0.8899

 

$

0.8669

 

n/a

 

2013

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

Jun.

 

Jul.

 

Aug.

 

Sep.

 

2012

 

$

0.8885

 

$

0.9063

 

$

0.8686

 

$

0.8659

 

$

0.8675

 

$

0.8376

 

$

0.8689

 

$

0.8457

 

$

0.8390

 

2013

 

$

0.8354

 

$

0.8290

 

$

0.8467

 

$

0.8781

 

$

0.8098

 

$

0.7662

 

$

0.7479

 

$

0.7259

 

$

0.7094

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS M

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

Jun.

 

Jul.

 

Aug.

 

Sep.

 

2012

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

1.0382

 

$

1.0115

 

$

1.0044

 

2013

 

$

1.0332

 

$

1.0262

 

$

1.0490

 

$

1.0890

 

$

1.0053

 

$

0.9520

 

$

0.9300

 

$

0.9035

 

$

0.8838

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DT

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

Jun.

 

Jul.

 

Aug.

 

Sep.

 

2012

 

$

0.9471

 

$

0.9678

 

$

0.9291

 

$

0.9279

 

$

0.9313

 

$

0.9008

 

$

0.9360

 

$

0.9126

 

$

0.9070

 

2013

 

$

0.9095

 

$

0.9041

 

$

0.9250

 

$

0.9611

 

$

0.8879

 

$

0.8415

 

$

0.8228

 

$

0.8000

 

$

0.7832

 

 

Liquidity and Capital Resources

 

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

 

Substantially all of the Fund’s assets are held in cash.  The Net Asset Value of the Fund’s cash is not affected by inflation.  However, changes in interest rates could cause periods of strong up or down price trends, during which the Fund’s profit potential generally increases.  Inflation in commodity prices could also generate price movements, which the strategies might successfully follow. The Fund should be able to close out its open trading positions and liquidate its holdings relatively quickly and at market prices, except in unusual circumstances.  This typically permits the Fund to limit losses as well as reduce market exposure on short notice should its strategies indicate doing so.

 

Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of last calendar day of each month, upon providing eight business days notice prior to the first of the month.  Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable redemption date.

 

19


 

As a commodity pool, the Fund maintains an extremely large percentage of its assets in cash, which it must have available to post initial and variation margin on futures contracts.  This cash is also used to fund redemptions.  While the Fund has the ability to fund redemption proceeds from liquidating positions, as a practical matter positions are not liquidated to fund redemptions.  In the event that positions were liquidated to fund redemptions, MLAI, as the manager of the Fund, has the ability to override decisions of the Trading Advisor to fund redemptions if necessary, but in practice the Trading Advisor would determine in its discretion which investments should be liquidated.

 

For the nine month period ended September 30, 2013, Fund capital decreased 32.29% from $33,425,351 to $22,633,293.  This decrease was attributable to the net loss from operations of $3,478,453 coupled with the redemption of 8,977,156 Redeemable Units resulting in an outflow of $7,497,886.  The cash outflow was offset with cash inflow of $184,281 due to subscriptions of 233,557 Units.  Future redemptions could impact the amount of funds available for investment in commodity contract positions in subsequent months.

 

Critical Accounting Policies

 

Statement of Cash Flows

 

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

 

Investments

 

All investments (including derivatives) are held for trading purposes.  Investments are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date.  Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date.  Profits or losses are realized when contracts are liquidated.  Unrealized profits or losses on open contracts are included as a component of equity in commodity trading accounts on the Statements of Financial Condition.  Realized profits or losses and any change in net unrealized profits or losses from the preceding period are reported in the Statements of Operations.

 

Fair Value Measurements

 

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

 

Futures Contracts

 

The Fund trades exchange listed futures contracts.  A listed futures contract is a firm commitment to buy or sell a standardized quantity of an underlying asset over a specified duration.  The Fund buys and sells contracts based on indices of financial assets such as stocks, domestic and global stock indices, as well as contracts on various physical commodities. Prices paid or received on these contracts are determined by the ask or bid provided by the exchanges on which they are traded.   Contracts may be settled in physical form or cash settled depending upon the contract.  Upon the execution of a trade, margin requirements determine the amount of cash that must be on deposit to secure the transaction.  These amounts are considered restricted cash on the Fund’s Statements of Financial Condition.  Contracts are priced daily by the Fund and the profit or loss based on the daily mark to market are recorded as unrealized profits.  When the contract is closed, the Fund records a realized profit or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.  Because

 

20


 

transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded, credit exposure is limited.  Realized profits (losses), net and changes in unrealized profits (losses), net on futures contracts are included in the Statements of Operations.  The Fund also trades futures contracts on the London Metals Exchange (LME). The valuation pricing for LME contracts is based on action of a committee that incorporates prices from the most liquid trading sessions of the day and can also rely on other inputs such as supply and demand factors and bid and asks from open outcry sessions.

 

Forward Foreign Currency Contracts

 

Foreign currency contracts are those contracts where the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date.  Foreign currency contracts are valued daily, and the Fund’s net equity therein, representing unrealized profit or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Financial Condition.  Realized profits (losses) and changes in unrealized profits (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively and are included in the Statements of Operations.

 

Interest Rates and Income

 

The Fund currently earns interest based on the prevailing Fed Funds rate plus a spread for short cash positions and minus a spread for long cash positions. The current short term interest rates have remained extremely low when compared with historical rates and thus has contributed negligible amounts to overall Fund performance.

 

Income Taxes

 

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

 

The Fund follows the Accounting Standards Codification guidance on accounting for uncertainty in income taxes.  This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the 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 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.  A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Fund’s tax positions and has concluded that no provision for income tax is required in the Fund’s financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States — 2010.

 

21


 

Reform Act

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was signed into law on July 21, 2010. The Reform Act enacts financial regulatory reform, and may alter the way in which the Fund conducts certain trading activities. The Reform Act includes measures to broaden the scope of derivative instruments subject to regulation, including requiring clearing and exchange trading of certain derivatives, imposing new capital and margin reporting, registration and business conduct requirements for certain market participants and imposing position limits on certain over-the-counter derivatives. The Reform Act grants the U.S. Commodity Futures Trading Commission and the Securities and Exchange Commission substantial new authority and requires numerous rulemakings by these agencies. The ultimate impact of these derivatives regulations, and the time it will take to comply, remains uncertain. The final regulations may impose additional operational and compliance costs on the Fund.

 

Results of Operations

 

January 1, 2013 to September 30, 2013

 

January 1, 2013 to March 31, 2013

 

The Fund experienced a net trading profit of $1,503,988 before brokerage commissions and related fees in the first quarter of 2013. The Fund’s profits were primarily attributable to the stock indices, currencies and the agriculture sectors posting profits. The metals, interest rates and the energy sectors posted losses.

 

The stock indices posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter due to the Trading Program’s long equity exposure across all regions, but particularly in U.S. and European indices. Losses were posted to the Fund in the middle of the quarter only to be reversed at the end of the quarter. The Trading Program’s long exposure to rising stock markets generated profits posted to the Fund at the end of the quarter.  U.S. equities added the largest contribution with main European indices and Japanese stocks also performing.

 

The currency sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. The Trading Program’s short exposure to the Japanese yen which fell (on a trade-weighted basis) following the announcement of a stimulus and deflation control package by the new government. Losses were posted to the Fund in the middle of the quarter. The Trading Program’s short GBP positions performed well due to the UK rating downgrade.  However, this was more than offset by losses from the Trading Program’s short U.S. dollar positions as the dollar rose on a trade weighted basis. Profits were posted to the Fund at the end of the quarter due to the Trading Program’s continuing short exposure to the U.S. dollar.

 

The agriculture sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter only to be reversed in the middle of the quarter. The Trading Program’s short positions resulted in profits posted to the Fund. Standout trades included short wheat as prices fell on U.S. drought easing weather conditions. Losses were posted to the Fund at the end of the quarter.

 

The metals sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter due to the Trading Program’s short gold exposure returning positive numbers. Losses were posted to the Fund in the middle of the quarter. The Trading Program’s long exposure to base metals suffered from the pull back in growth sensitive commodities over February. Profits were posted to the Fund at the end of the quarter.

 

22


 

The interest rate sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter due to the Trading Program’s long fixed income exposure, as U.S. Treasuries and French bonds were the main detractors. Profits were posted to the Fund in the middle of the quarter. The Trading Program’s long exposure to both bonds and short term interest rates performed well in February reversing some of the sector’s losses from January as markets returned to a more cautious state, following the bullish nature of January.  As such safe haven bonds (U.S. Treasuries in particular) returned some of the larger gains. On the interest rate side, long positions in Eurodollar, Euribor and Short Sterling all contributed positive performance as there continued to be no immediate end in sight to the relaxed monetary policies of the major central banks. Profits were posted to the Fund at the end of the quarter. Yields on most European debt fell, benefitting the Fund, as investors sought safety in light of Eurozone issues.  A small portion of the gain was given back via Italian long dated bonds and U.S. Treasuries.

 

The energy sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter. Losses were posted to the Fund in the middle of the quarter including the Trading Program’s long positions in crude oil and its by-products. Losses were posted to the Fund at the end of the quarter. The Trading Program was positioned long in the energy market at the beginning of March and suffered as oil prices fell, but reduced this exposure in March and did not participate in some of the upward movement towards the end of the month.

 

April 1, 2013 to June 30, 2013

 

The Fund experienced a net trading loss of $2,434,354 before brokerage commissions and related fees in the second quarter of 2013. The Fund’s profits were primarily attributable to the metals and agriculture sectors posting profits. The currencies, stock indices, energy and interest rate sectors posted losses.

 

The metals sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter resulting from the Trading Program’s short allocation to both precious and base metals. A fall in Chinese GDP growth undermined demand expectations for industrial commodities while fears that other struggling Eurozone nations would follow Cyprus’s lead and dump their gold reserves concerned gold investors. Losses were posted to the Fund in the middle of the quarter. Profits were posted to the Fund at the end of the quarter resulting from the Trading Program’s short positions in metals as prices of both base and precious metals fell sharply over the period.  The gold price suffered as rupee weakness resulted in a reduction in physical demand from India. For base metals, short copper was the lead performer; credit tightening in China undermined demand expectations and worries over an early wind-down of U.S. stimulus added further pressure.

 

The agriculture sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter resulting from wheat and corn. Profits were posted to the Fund in the middle of the quarter resulting form the Trading Program’s long positions in soyabeans and short sugar positions. Profits were posted to the Fund at the end of the quarter.

 

The currency sector posted losses to the Fund. Profits were posted to the Fund at the beginning and end of the quarter. Losses were posted to the Fund in the middle of the quarter resulting from a short U.S. dollar versus a number of commodity-linked currency trades.

 

The stock indices posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter. Equity markets progressed over April as investors put their faith in further injections of liquidity

 

23


 

by the world’s central banks. Profits were also posted to the Fund in April resulting from the Trading Program’s long allocation including Japanese equities which were boosted by talk of additional monetary easing by the Bank of Japan. Profits were posted to the Fund in the middle of the quarter. Stock trading was the largest positive contributor in May as long U.S. and European holdings benefitted from the equity rally before returns were trimmed in the final week. Losses were posted to the Fund at the end of the quarter. Equity holdings detracted significantly, with Taiwanese and South African stocks being the largest single negatives and exposure to European equities also resulting in a loss.

 

The energy sector posted losses to the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter resulting from the Trading Program’s long position in natural gas. Losses were posted to the Fund at the end of the quarter. The Trading Program’s long exposure to natural gas detracted, with cooler weather forecasts meaning demand from air conditioning users would not be as strong.  Oil holdings also suffered; poor manufacturing data from China, speculation over the future of QE in the U.S. and moves in the U.S. dollar resulted in increased price volatility which caused a whipsawing of positions.

 

The interest rate sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter.  The Trading Program’s long exposure to fixed income assets added a noteworthy share of returns with European bonds, U.S. Treasuries and Eurodollar contracts all delivering profits though long exposure to Japanese bonds detracted slightly Demand for “safe haven” bonds was buoyed by worsening growth prospect following disappointing economic data from the U.S. Losses were posted to the Fund in the middle of the quarter.  U.S. Treasuries were among the most notable losses as yields jumped after comments by U.S. Federal Reserve Chairman Ben Bernanke might reduce its bond buying program. Further negative performance came from UK gilts and bonds from commodity focused economies.  Long exposure to interest rate holdings also incurred a loss following a cut in Eurozone rates. Losses were posted to the Fund at the end of the quarter. U.S. Treasuries delivered negative performance in June as yields jumped following the Federal Open Market Committee meeting.  European bonds were also loss-making, coming under pressure from the general sell-off in fixed income. The Trading Program’s long holdings of short-term interest rates suffered as expectations of future rate rises increased following comments by Chairman Bernanke that the downside risks to the economy and labor market had diminished.

 

July 1, 2013 to September 30, 2013

 

The Fund experienced a net trading loss of $1,602,201 before brokerage commissions and related fees in the third quarter of 2013. The Fund’s profits were primarily attributable to the stock indices and agriculture sectors posting profits. The energy, metals, interest rate and currencies sectors posted losses.

 

The stock indices posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. A positive contribution came from the Trading Program’s long exposure to equities.  Gains were concentrated in U.S. and European stocks as equity markets reacted positively to the U.S. Federal Reserve’s comments, positive Eurozone manufacturing reports and labor figures from the U.S.  Losses were posted to the Fund in the middle of the quarter. The change in risk appetite at the end of August, triggered by the conflict with Syria, was costly to performance.  The Trading Program’s long exposure to United States and European stock indices suffered heavily as equities fell out of favor. Profits were posted to the Fund at the end of the quarter as losses were mitigated slightly as confidence in the United States recovery and more positive reports from Japan resulted in a positive return from the Trading Program’s long equity holdings though this performance was reduced as stock markets reversed in the last week of September.

 

24


 

The agriculture sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. The Trading Program’s short cocoa positions suffered as drier weather predictions in Africa threatened supply.  The Trading Program’s short positions in coffee also detracted as frost forecasts in Brazil created upward price pressure and long soya holdings fell on reduced demand and strong crop reports.  Some gains came from short exposure to corn which collapsed as ideal U.S. weather boosted crop outlook. Profits were posted to the Fund in the middle through the end of the quarter. Agricultural holdings were positive overall in the month of August. The Trading Program’s long exposure to soybeans was the standout trade as scorching Midwest temperatures threatened to damage the crop.

 

The energy sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter. Rising tensions in Egypt and the pick-up in risk appetite also lifted oil prices which benefited the Trading Program’s long crude positions. Profits were posted to the Fund in the middle of the quarter as crude oil ended higher on Middle East tensions, resulting from the Trading Program’s long holdings. Losses were posted to the Fund at the end of the quarter. The Trading Program’s long exposure to oil detracted as fears over a possible military strike on Syria receded.

 

The metals sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. The Trading Program’s metals holdings suffered on the short-side.  Base metals rose as Chinese growth figures came in at around the expected level, despite comments by the country’s finance minister of a lower target.  Precious metal prices also finished higher; growing Chinese inflation and easing concern over future U.S. monetary policy lifted demand for gold and other stores of value. Losses were posted to the Fund in the middle of the quarter. Negative attribution from industrial metals was compounded by short exposure to precious metals which also detracted as both gold and silver experienced price jumps.  Losses were posted to the Fund at the end of the quarter.

 

The interest rate sector posted losses to the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter. Rising yields hurt the Trading Program’s long exposure to U.S. treasuries which was one of the largest negatives in August.  Losses within interest rates were concentrated in the Trading Program’s long Eurodollar positions as economic data raised Eurozone interest rate expectations. Losses were posted to the Fund at the end of the quarter. Bond holdings delivered a small gain with long exposure to U.S. Treasuries being the strongest contributor.  Long exposure to German and French debt generated positive performance as higher grade fixed income attracted safe haven inflows from investors concerned over political wrangling in Italy and America.  Long holdings of Italian bonds resulted in a loss with further destabilizing of the coalition government resulting in heavy selling of the country’s debt

 

The currency sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. Currency trading was a notable detractor as the Trading Program’s long exposure to the U.S. dollar suffered as the prospect of continuing accommodative monetary policy weighed on the U.S. dollar.  Losses were posted to the Fund in the middle through the end of the quarter. The Trading Program’s long exposure to the U.S. dollar generally was a loss-making trade; the U.S. dollar fell on a trade-weighted basis as reduced expectations of stimulus tapering and an impending government shutdown both weighed on the currency.  Negative performance was particularly concentrated in U.S. dollar pairs against emerging-market currencies.  Euro exposures also detracted slightly on both the long and short side.

 

25


 

January 1, 2012 to September 30, 2012

 

January 1, 2012 to March 31, 2012

 

The Fund experienced a net trading loss of $1,343,955 before brokerage commissions and related fees in the first quarter of 2012. The Fund’s profits were primarily attributable to the stock indices, energy and the agriculture sectors posting profits. The currency, metals, and the interest rate sectors posted losses.

 

The stock indices posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter.  Profits from long positions in U.S. stock indices were outweighed by short positions in Asian bourses. U.S. stock indices were especially driven by economic data releases that suggested the U.S. economy was in a better shape than some feared while the positive news out of China further elevated equities in Asia. Profits were posted to the Fund in the middle of the quarter as the stock sector led returns as the increased market confidence benefited a broad long positioning. The largest gains came from U.S. stock indices such as the S&P 500 and NASDAQ 100 as prices were buoyed by an improvement in U.S. jobless claims, housing starts, consumer prices and business outlook data.  Long exposure to the DAX also profited as the index rallied from the seemingly improved prognosis for Greece as well as continued ‘unlimited’ liquidity for Eurozone banks by the European Central Bank. Long positions in the exposure to stock indices added gains via U.S. and Japanese indices which was not enough to offset losses posted to the Fund at the end of the quarter.

 

The energy sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter as returns were driven by exposure to energy contracts.  Long crude oil holdings were one of the largest contributors while oil derivatives also added respectable gains. Oil experienced strong price rises due to the improved risk appetite, a more positive growth outlook, and concerns over Iran’s nuclear testing combined with the announcement it would cut supply to British and French firms. Profits were posted to the Fund in the middle of the quarter. Long crude oil holdings were one of the largest contributors while oil derivatives also added profits. Losses were posted to the Fund at the end of the quarter due to global volatility.

 

The agriculture sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. The Trading program’s short positions posted losses with exposure to cocoa and corn seeing some of the larger negative performances. For cocoa, prices rallied supported by unusually dry and hot weather in the Ivory Coast. Corn also pushed higher as unfavorable weather conditions in Argentina was pooled with a U.S. Department of Agriculture report which forecast lower-than-expected crop production in the 2011-2012 season. Profits were posted to the Fund in the middle through the end of the quarter. Profits in March were led by short positions in coffee and long positions in the soya exposure. Coffee prices fell amid increased supplies from Brazil while soya prices rose on anticipation of a record drop in supplies, as South America (which produces half of the world’s soyabeans) faced a drought.

 

The currency sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. Long U.S. dollar exposure offset profits elsewhere in the sector as the U.S. dollar fell on a trade-weighted basis after signs of an economic recovery in the U.S. boosted investor risk appetite and saw the ‘safe-haven’ currency sell-off for much of the month. Profits were posted to the Fund in the middle of the quarter. Long positions in the Australian dollar /Japanese yen proved the leading trade as the Australian dollar rallied after interest rates were left unchanged. While the U.S. dollar ended the period flat on a trade weighted basis, some short U.S. dollar pairs still added gains as increased risk appetite meant the U.S. dollar generally lost ground to emerging market and commodity-linked currencies. Losses were posted to the Fund at the end of the quarter. Short exposure to the U.S.

 

26


 

dollar suffered after the U.S. dollar rallied on better-than-expected U.S. jobs and housing data. Long positions in the Australian dollar (which is highly dependent on Chinese demand for commodities) further weighed on performance as, despite the improved risk appetite, investors became concerned over a slowdown in Chinese growth and the potential economic impact on the region.

 

The metals sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter in both precious and industrials. Some of the most notable losses included short positions in aluminum and platinum as both rose over 10%. For platinum, prices were supported by power shortages in South Africa while better-than-expected economic data out of China boosted the outlook for industrial aluminum demand. Losses were posted to the Fund in the middle of the quarter with long exposure to gold the largest detractor.  The yellow metal had experienced strong price rises for most of the period driven by inflation concerns and nervousness surrounding Eurozone debt. Losses were posted to the Fund at the end of the quarter. Long positions in gold suffered as downbeat expectations of ‘QE3’ and a strengthening U.S. dollar led the yellow metal down. Additional losses were attributed to long exposure to silver and copper.

 

The interest rate sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter. Trading in bonds and short-term interest rates led returns in January. Long positions in U.S. Treasuries made up the majority of bond sector gains as prices jumped following the unexpected announcement by the U.S. Federal Reserve that interest rates would be held at near zero until at least 2014. Increased anxiety over developments in the European sovereign debt crisis further added support and also proved particularly beneficial for long positions in Euro-BOBL and Euro-BUND contracts. In the short-term interest rate space, additional gains came from long positions in Euribor and Eurodollar futures. Losses were posted to the Fund in the middle of the quarter.  Long exposure to fixed income assets dragged on performance as investors increasingly sought riskier assets during the month of February.  In bonds, long exposure to U.S. Treasuries proved the single largest loss as prices fell following uplifting economic data releases in the U.S. In the short-term sector, long Eurodollar contracts were also detrimental as expectations of further easing in the U.S. declined. Losses were posted to the Fund at the end of the quarter. In bonds, long holdings of U.S. Treasuries detracted the most from returns as prices fell following positive economic comments by the U.S. Federal Reserve which led to reduced expectations for further quantitative easing.  Long positions in European and U.K. government bonds also dented returns as prices came under pressure from the increased risk appetite during the month. Short-term interest rate trading was similarly impacted during March with losses spread across long positions in Eurodollar, Euribor and Short sterling contracts.

 

April 1, 2012 to June 30, 2012

 

The Fund experienced a net trading loss of $1,407,823 before brokerage commissions and related fees in the second quarter of 2012. The Fund’s profits were primarily attributable to the interest rates and the metals sectors posting profits. The agriculture, energy, currency and the stock indices sectors posted losses.

 

The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter.  Long-side exposure to bonds provided the strongest uplift as investors increased their demand in the uncertain environment.  German sovereign bonds were the main driver as general risk aversion, anxiety over Eurozone bailouts and less than encouraging economic indicator data added to demand for bonds. Long holdings of U.S. Treasuries added a small gain and long exposure to interest rate contracts, namely Euribor and Eurodollar, benefited from the European Central Bank’s decision to hold rates and an expectation that U.S. rates will remain historically low in the near term.  Profits were posted to the

 

27


 

Fund in the middle of the quarter. The trading program’s long exposure to bonds largely drove performance in May as investors increasingly flocked to ‘safe haven’ assets. In particular, positions in German bonds, U.S. Treasuries and U.K. Gilts proved well placed as the ‘flight to quality’ drove German and U.K. yields lower. Also, long positions in Euribor contracts also added returns as investors speculated that the European Central Bank would cut rates in the near-term as economic data continued to disappoint in the Eurozone region.  Losses were posted to the Fund at the end of the quarter.   For June as a whole, long exposure to bonds and the U.S. dollar struggled as investors sold out of safe haven assets. Holdings in German bonds, Australian bonds, U.K. Gilts and U.S. Treasuries detracted the most from performance.

 

The metals sector posted profits to the Fund.  Losses were posted to the Fund at the beginning of the quarter with the largest loss sustained from copper positions which were whipsawed by volatile prices.  Profits were posted to the Fund in the middle of the quarter. The trading program’s largely short stance to metals benefited from a moderation in demand amid a stronger U.S. dollar, reduced investor exposure, an economic slowdown in developed countries and China’s deceleration. Some of the stronger gains came from the trading program’s short positions in aluminum and copper which fell almost 6% and 13% respectively. Losses were posted to the Fund at the end of the quarter as gold positions contributed notable losses.

 

The agriculture sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter. Losses were posted to the Fund in the middle through the end of the quarter as the trading program’s short positions in agriculturals (sugar, wheat and corn) also struggled as prices climbed on supply concerns.

 

The energy sector posted losses to the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter. Losses were posted to the Fund at the end of the quarter due to notable losses in the trading program’s short natural gas positions.

 

The currency sector posted losses to the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter. In May, the market backdrop drove investor demand for the perceived safe havens of U.S. dollar and Japanese yen while demand decreased for certain commodity linked and emerging market currencies. As a result, short U.S. dollar exposures weighed on returns, especially against the Turkish lira, South African rand and Polish zloty. However, short Euro positions helped partially offset losses (as the Euro fell around 4% on a trade weighted basis) due to the increasingly nervous sentiment in the Eurozone.  Losses were posted to the Fund at the end of the quarter. The trading program’s long positions in the U.S. dollar also proved unfavorable, particularly against emerging market currencies at months end.

 

The stock indices posted losses to the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter. Stocks experienced volatility following elections in Europe (Greece, France, Italy, Germany) and negative news flows such as banking woes in Spain, JP Morgan’s trading loss and China’s slower growth. Losses were posted to the Fund at the end of the quarter as the trading program’s short exposure to Japanese indices returned the largest losses. Stocks surged on positive European news amid mounting expectations of aggressive interventions, after Greece’s New Democracy and Pasok clinched election victory and after the Eurozone leaders agreed to help Spain and Italy survive the crisis.

 

28


 

July 1, 2012 to September 30, 2012

 

The Fund experienced a net trading profit of $695,520 before brokerage commissions and related fees in the third quarter of 2012. The Fund’s profits were primarily attributable to the interest rates, currencies and the agriculture sectors posting profits. The stock indices, metals and the energy sectors posted losses.

 

The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter.  The trading program had a strong July, capitalizing on bearish trends in the market. Overall, long exposure to bonds and interest rates drove performance as the deteriorating economic picture spurred investors to prioritize capital preservation over growth. Losses were posted to the Fund in the middle of the quarter as, Canadian bonds, U.S. Treasuries and Australian bonds weighed on returns. Losses were posted to the Fund at the end of the quarter as the trading program’s long exposure to bonds added slightly to performance but not enough to offset losses.

 

The currency sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter with the trading program’s short Euro pairs proving profitable after the European Central Bank cut interest rates. Losses were posted to the Fund in the middle of the quarter as trading detracted from performance due to a lack of clear trends. Both long and short U.S. dollar exposures ended with modest losses, while Euro trading posted losses from general short positioning. Profits were posted to the Fund at the end of the quarter driven by short U.S. dollar pairs which generated profits as news of QE3 put downward pressure on the U.S. dollar.

 

The agriculture sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter as long exposure to agriculturals proved well placed as fears of a renewed food shortage crisis re-emerged after droughts hit the U.S. and lowered supply expectations. In particular, corn and soya prices reached record levels while wheat prices remained elevated. Profits continued to be posted to the Fund in the middle of the quarter only to be reversed at the end of the quarter. The trading program’s long positions struggled as the S&P Agriculture Index fell over the period.

 

The stock indices posted losses to the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter as the trading program profited from long U.S. indices positions. Profits were posted to the Fund at the end of the quarter. The trading program’s long exposure to stocks added gains as demand for riskier assets increased. U.S. and German indices were the main benefactors.

 

The metals sector posted losses to the Fund.  Profits were posted to the Fund at the beginning of the quarter only to be reversed in the middle of the quarter. The trading program’s short position proved disadvantageous as prices rose on labor unrest in the South African platinum industry, which began to spread to other commodities.  Losses were posted to the Fund at the end of the quarter as gains (from precious metals) were eroded by short holdings of base metals, which suffered as industrial commodities were lifted by improved demand expectations

 

The energy sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. The trading program’s short exposure to energies, especially crude oil and oil derivatives detracted from performance as geopolitical tensions in the Middle East and a marginally weaker U.S. dollar contributed to the rise in oil prices. Losses were posted to the Fund in the middle of the quarter. The trading program’s short exposure to electricity hurt returns as prices rose on higher air conditioning demand due to hot summer weather in the northern hemisphere. Losses were posted to the Fund at the end of the quarter. The energy allocation lost value as the trading program’s long exposures to oil (and oil derivatives), and short exposure to natural gas resulted in small losses.

 

29


 

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

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Introduction

 

The Fund is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes and all or substantially all of the Fund’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 Fund’s main line of business.

 

Market movements result in frequent changes in the fair market value of the Fund’s open positions and, consequently, in its earnings and cash flow. 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 Fund’s open positions and the liquidity of the markets in which it trades.

 

The Fund, under the direction of Man AHL, 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 future market scenario will affect performance, and the Fund’s past performance is not necessarily indicative of its future results.

 

Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund’s speculative trading and the recurrence in the markets traded by the 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 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 quantifications included in this section should not be considered to constitute any assurance or representation that the Fund’s losses in any market sector will be limited to Value at Risk or by the Fund’s attempts to manage its market risk.

 

Quantifying The Fund’s Trading Value At Risk

 

Quantitative Forward-Looking Statements

 

The following quantitative disclosures regarding 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 and Section 21E of the Securities Exchange Act of 1934).  All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

 

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

 

30


 

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

 

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

 

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

 

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

 

The following table indicates the average, highest and lowest trading Value at Risk associated with the Fund’s open positions by market category for the fiscal period. For the nine month periods ended September 30, 2013 and 2012, the Fund’s average Month-end Net Asset Value was approximately $29,007,652 and $48,403,714 respectively.

 

September 30, 2013

 

 

 

Average Value

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

at Risk

 

Capitalization

 

at Risk

 

at Risk

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

$

162,647

 

0.56

%

$

280,602

 

$

59,958

 

Currencies

 

628,824

 

2.17

%

1,160,682

 

213,372

 

Energy

 

53,269

 

0.18

%

122,709

 

13,614

 

Interest Rates

 

1,517,176

 

5.23

%

2,540,683

 

475,805

 

Metals

 

334,875

 

1.15

%

593,282

 

117,941

 

Stock Indices

 

111,249

 

0.38

%

283,813

 

21,713

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

2,808,040

 

9.67

%

$

4,981,771

 

$

902,403

 

 

31


 

September 30, 2012

 

 

 

Average Value

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

at Risk

 

Capitalization

 

at Risk

 

at Risk

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

$

310,394

 

0.64

%

$

638,074

 

$

29,204

 

Currencies

 

1,176,171

 

2.43

%

2,270,172

 

148,956

 

Energy

 

329,449

 

0.68

%

594,978

 

223,649

 

Interest Rates

 

766,508

 

1.58

%

1,203,980

 

435,025

 

Metals

 

439,241

 

0.91

%

891,192

 

23,753

 

Stock Indices

 

652,565

 

1.35

%

1,255,739

 

216,620

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

3,674,328

 

7.59

%

$

6,854,135

 

$

1,077,207

 

 

Material Limitations on Value at Risk as an Assessment of Market Risk

 

The face value of the market sector instruments held by the Fund is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund.  The magnitude of the Fund’s open positions creates a “risk of ruin” not typically found in most other investment vehicles.  Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Fund to incur severe losses over a short period of time.   The foregoing Value at Risk table — as well as the past performance of the Fund — gives no indication of this “risk of ruin.”

 

Non-Trading Risk

 

Foreign Currency Balances; Cash on Deposit with MLPF&S and MLIB

 

The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial.

 

The Fund also has non-trading market risk on approximately 90% of its assets which are held in cash at MLPF&S. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding the Fund’s market risk exposures - except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Fund’s primary market risk exposures as well as the strategies used and to be used by MLAI and Man AHL for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund’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

 

32


 

well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of the value of their investment in the Fund.

 

The following were the primary trading risk exposures of the Fund as of September 30, 2013, by market sector.

 

Interest Rates

 

Interest rate movements directly affect the price of derivative sovereign bond positions held by the Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact the Fund’s profitability. The Fund’s primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries.  However, the Fund also takes positions in the government debt of smaller nations e.g., Australia. MLAI anticipates that G-7 interest rates will remain the primary market exposure of the Fund for the foreseeable future.

 

Currencies

 

The Fund trades in a number of currencies. The Fund does not anticipate that the risk profile of the Fund’s currency sector will change significantly in the future. The currency trading Value at Risk figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk of maintaining Value at Risk in a functional currency other than U.S. dollars.

 

Stock Indices

 

The Fund’s primary equity exposure is to S&P 500, Nikkei and German DAX equity index price movements. The Fund is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Asian indices.

 

Metals

 

The Fund’s metals market exposure is to fluctuations in the price of precious and non-precious metals.

 

Agricultural Commodities

 

The Fund’s primary agricultural commodities exposure is to agricultural price movements which are often directly affected by severe or unexpected weather conditions. Soybeans, grains, and livestock accounted for the substantial bulk of the Fund’s agricultural commodities exposure as of September 30, 2013. However, it is anticipated that the Fund will maintain an emphasis on cotton, grains and sugar, in which the Fund has historically taken its largest positions.

 

Energy

 

The Fund’s primary energy market exposure is to natural gas and crude oil price movements, often resulting from political developments in the Middle East. Oil prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.

 

33


 

Qualitative Disclosures Regarding Non-Trading Risk Exposure

 

The following were the only non-trading risk exposures of the Fund as of September 30, 2013.

 

Foreign Currency Balances

 

The Fund’s primary foreign currency balances are in Hong Kong dollar and Swedish krona.

 

U.S. Dollar Cash Balance

 

The Fund holds U.S. dollars in cash at MLPF&S and MLIB. The Fund has immaterial cash flow interest rate risk on its cash on deposit with MLPF&S in that declining interest rates would cause the income from such cash to decline.

 

Item 4. Controls and Procedures

 

MLAI, the Sponsor of Man AHL FuturesAccess LLC, with the participation of the Sponsor’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934) with respect to the Fund as of the end of the period covered by this quarterly report.  Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.  No change in internal control over financial reporting (in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934) occurred during the quarter ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.                                 Legal Proceedings

 

None.

 

Item 1A.  Risk Factors

 

There are no material changes from risk factors as previously disclosed in the Fund’s report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on March 27, 2013.

 

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

 

(a)  Units are privately offered and sold to “accredited investors” (as defined in Rule 501(a) under the Securities Act in reliance on the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 thereunder.  The selling agent of the Units was MLPF&S.

 

34


 

CLASS A

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-13

 

$

9,800

 

12,062

 

$

0.8125

 

Feb-13

 

9,800

 

11,844

 

0.8274

 

Mar-13

 

—

 

—

 

0.8208

 

Apr-13

 

—

 

—

 

0.8380

 

May-13

 

—

 

—

 

0.8689

 

Jun-13

 

—

 

—

 

0.8010

 

Jul-13

 

—

 

—

 

0.7576

 

Aug-13

 

—

 

—

 

0.7392

 

Sep-13

 

—

 

—

 

0.7173

 

Oct-13

 

—

 

—

 

0.7007

 

 

CLASS C

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-13

 

$

—

 

—

 

$

0.7995

 

Feb-13

 

30,000

 

36,878

 

0.8135

 

Mar-13

 

—

 

—

 

0.8063

 

Apr-13

 

20,000

 

24,313

 

0.8226

 

May-13

 

—

 

—

 

0.8521

 

Jun-13

 

—

 

—

 

0.7850

 

Jul-13

 

15,000

 

20,221

 

0.7418

 

Aug-13

 

—

 

—

 

0.7232

 

Sep-13

 

68,681

 

97,962

 

0.7011

 

Oct-13

 

12,775

 

18,666

 

0.6844

 

 

CLASS M

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-13

 

$

—

 

—

 

$

1.0133

 

Feb-13

 

—

 

—

 

1.0332

 

Mar-13

 

—

 

—

 

1.0262

 

Apr-13

 

10,000

 

9,533

 

1.0490

 

May-13

 

7,000

 

6,428

 

1.0890

 

Jun-13

 

7,000

 

6,963

 

1.0053

 

Jul-13

 

7,000

 

7,353

 

0.9520

 

Aug-13

 

—

 

—

 

0.9300

 

Sep-13

 

—

 

—

 

0.9035

 

Oct-13

 

—

 

—

 

0.8838

 

 

CLASS I

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-13

 

$

—

 

—

 

$

0.8201

 

Feb-13

 

—

 

—

 

0.8354

 

Mar-13

 

—

 

—

 

0.8290

 

Apr-13

 

—

 

—

 

0.8467

 

May-13

 

—

 

—

 

0.8781

 

Jun-13

 

—

 

—

 

0.8098

 

Jul-13

 

—

 

—

 

0.7662

 

Aug-13

 

—

 

—

 

0.7479

 

Sep-13

 

—

 

—

 

0.7259

 

Oct-13

 

—

 

—

 

0.7094

 

 

CLASS DT

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-13

 

$

—

 

—

 

$

0.8912

 

Feb-13

 

—

 

—

 

0.9095

 

Mar-13

 

—

 

—

 

0.9041

 

Apr-13

 

—

 

—

 

0.9250

 

May-13

 

—

 

—

 

0.9611

 

Jun-13

 

—

 

—

 

0.8879

 

Jul-13

 

—

 

—

 

0.8415

 

Aug-13

 

—

 

—

 

0.8228

 

Sep-13

 

—

 

—

 

0.8000

 

Oct-13

 

—

 

—

 

0.7832

 

 

(1) Beginning of the month Net Asset Value

 

Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%.  Class D Units and Class I Units are subject to sales commissions paid to MLPF&S up to 0.5%.  The rate assessed to a given subscription is based upon the subscription amount.  Sales commissions are directly deducted from subscription amounts.  Class C Units, Class DT Units and Class M Units are not subject to any sales commissions.

 

(b)  Not applicable.

(c)  Not applicable.

 

Item 3.                                 Defaults Upon Senior Securities

 

None.

 

Item 4.                                 Mine Safety Disclosures

 

Not applicable.

 

35


 

Item 5.                                 Other Information

 

None.

 

Item 6.                                 Exhibits

 

The following exhibits are filed herewith to this Quarterly Report on Form 10-Q:

 

31.01 and

31.02                                         Rule 13a-14(a)/15d-14(a) Certifications

 

Exhibit 31.01

and 31.02:             Are filed herewith.

 

32.01 and

32.02                                         Section 1350 Certifications

 

Exhibit 32.01

and 32.02                 Are filed herewith.

 

Exhibit 101         Are filed herewith.

 

The following materials from the Fund’s quarterly Report on Form 10-Q for the three and nine month periods ended September 30, 2013 formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Financial Condition (ii) Statements of Operations (iii) Statements of Changes in Members’ Capital (iv) Financial Data Highlights and (v) Notes to Financial Statements, tagged as blocks of text. (1)

 

(1)  These interactive data files shall not be deemed filed for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under those sections.

 

36


 

SIGNATURES

 

Pursuant to the requirements 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.

 

 

 

 

 

MAN AHL FUTURESACCESS LLC

 

 

 

 

 

 

 

 

By:

MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC

 

 

 

(Manager)

 

 

 

 

 

 

Date: November 14, 2013

 

By:

/s/ KEITH GLENFIELD

 

 

 

Keith Glenfield

 

 

 

Chief Executive Officer and President

 

 

 

(Principal Executive Officer)

 

 

 

 

 

 

Date: November 14, 2013

 

By:

/s/ BARBRA E. KOCSIS

 

 

 

Barbra E. Kocsis

 

 

 

Chief Financial Officer

 

 

 

(Principal Financial Officer)

 

37