UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20549
FORM 10-Q
x Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2014
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 0-49767
MLM INDEX™ FUND
(Exact name of registrant as specified in its charter)
DELAWARE | Unleveraged Series: 22-2897229 | |
Leveraged Series: 22-3722683 | ||
Commodity L/N Unleveraged Series: 27-1198002 | ||
Commodity L/S Unleveraged Series: 20-8806944 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
405 South State Street, Newtown, PA
(Address of principal executive offices)
18940
(Zip Code)
(267) 759-3500
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
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, 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 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 definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” “ in Rule 12-b-2 of the Exchange Act. (Check One):
Large Accelerated Filer o AcceleratedFiler o Non-Accelerated Filer x Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act).
Yes o No x
MLM Index™ Fund
September 30, 2014
PART I – FINANCIAL INFORMATION | ||
Item 1 | Page Number | |
4-10 | ||
11-17 | ||
18-24 | ||
25-31 | ||
32-38 | ||
39-52 | ||
Item 2 | 53-57 | |
Item 3 | 57-59 | |
Item 4 | 59-60 | |
PART II – OTHER INFORMATION | ||
Item 1 | 61 | |
Item 1A | 61 | |
Item 2 | 61 | |
Item 3 | 61 | |
Item 4 | 61 | |
Item 5 | 61 | |
Item 6 | 62 |
MLM INDEX™ FUND
CONDENSED STATEMENTS OF FINANCIAL CONDITION
As of September 30, 2014 (Unaudited) and December 31, 2013
ASSETS | September 30, 2014 | December 31, 2013 | ||||||
Cash and cash equivalents | $ | 53,455,368 | $ | 38,783,078 | ||||
Due from broker | 4,232,472 | 4,228,397 | ||||||
Net unrealized gain on open futures contracts, at fair value | 1,913,688 | 581,248 | ||||||
Interest receivable | 177 | 7 | ||||||
Total assets | $ | 59,601,705 | $ | 43,592,730 | ||||
LIABILITIES AND INVESTORS’ INTEREST | ||||||||
Liabilities | ||||||||
Redemptions payable | $ | 613,438 | $ | 4,728,284 | ||||
Brokerage commissions payable | 14,710 | 14,594 | ||||||
Management fee payable | 24,602 | 19,388 | ||||||
Accrued expenses | 8,865 | 8,652 | ||||||
Total liabilities | 661,615 | 4,770,918 | ||||||
Investors’ interest | 58,940,090 | 38,821,812 | ||||||
Total liabilities and investors’ interest | $ | 59,601,705 | $ | 43,592,730 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
MLM IndexTM Unleveraged Series
September 30, 2014 (Unaudited)
Description | Number of Contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Financial | 137 | $ | 12,115 | 0.02 | % | |||||||
Commodity | 21 | 76,710 | 0.13 | |||||||||
158 | 88,825 | 0.15 | ||||||||||
Short futures contracts | ||||||||||||
Financial | (171 | ) | 748,231 | 1.27 | ||||||||
Commodity | (327 | ) | 1,076,632 | 1.83 | ||||||||
(498 | ) | 1,824,863 | 3.10 | |||||||||
Net unrealized gain on open futures contracts, at fair value | $ | 1,913,688 | 3.25 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
MLM IndexTM Unleveraged Series
December 31, 2013
Description | Number of contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Financial | 50 | $ | 164,220 | 0.42 | % | |||||||
Commodity | 50 | 5,205 | 0.01 | |||||||||
100 | 169,425 | 0.43 | ||||||||||
Short futures contracts | ||||||||||||
Financial | (152 | ) | 392,430 | 1.01 | ||||||||
Commodity | (160 | ) | 19,393 | 0.05 | ||||||||
(312 | ) | 411,823 | 1.06 | |||||||||
Net unrealized gain on open futures contracts, at fair value | $ | 581,248 | 1.49 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
MLM IndexTM Unleveraged Series
For the three and nine months ended September 30, 2014 and 2013 (Unaudited)
For the three months ended September 30, 2014 | For the three months ended September 30, 2013 | For the nine months ended September 30, 2014 | For the nine months ended September 30, 2013 | |||||||||||||
Investment income | ||||||||||||||||
Interest | $ | 5,209 | $ | 3,693 | $ | 13,569 | $ | 17,966 | ||||||||
Expenses | ||||||||||||||||
Brokerage commissions | 47,006 | 48,774 | 125,582 | 144,975 | ||||||||||||
Management fee | 73,474 | 61,593 | 171,326 | 180,347 | ||||||||||||
Operating expenses | 59,136 | 50,665 | 143,298 | 148,035 | ||||||||||||
Total expenses | 179,616 | 161,032 | 440,206 | 473,357 | ||||||||||||
Net investment loss | (174,407 | ) | (157,339 | ) | (426,637 | ) | (455,391 | ) | ||||||||
Realized and unrealized gain (loss) on investments | ||||||||||||||||
Net realized (loss) gain on investments | (52,692 | ) | 357,848 | 24,861 | (998,403 | ) | ||||||||||
Net change in unrealized appreciation and depreciation on investments | 1,714,662 | (400,021 | ) | 1,321,918 | 52,648 | |||||||||||
Net realized and unrealized gain (loss) on investments | 1,661,970 | (42,173 | ) | 1,346,779 | (945,755 | ) | ||||||||||
Net gain (loss) | $ | 1,487,563 | $ | (199,512 | ) | $ | 920,142 | $ | (1,401,146 | ) |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS’ INTEREST
MLM IndexTM Unleveraged Series
For the nine months ended September 30, 2014 (Unaudited)
Unleveraged Series | ||||||||||||||||||||||||
Class A Shares | Class B Shares | Class C Shares | Class D Shares | Class E Shares | Total Unleveraged Series | |||||||||||||||||||
Investors’ interest at December 31, 2013 | $ | 1,133,968 | $ | 786,759 | $ | 1,175 | $ | 36,899,910 | $ | ─ | $ | 38,821,812 | ||||||||||||
Subscriptions | ─ | ─ | ─ | 3,275,000 | 19,599,401 | 22,874,401 | ||||||||||||||||||
Redemptions | (741,914 | ) | (64,093 | ) | ─ | (2,870,258 | ) | ─ | (3,676,265 | ) | ||||||||||||||
Net (loss) income | (13,022 | ) | 4,254 | 8 | 417,912 | 510,990 | 920,142 | |||||||||||||||||
Investors’ interest at September 30, 2014 | $ | 379,032 | $ | 726,920 | $ | 1,183 | $ | 37,722,564 | $ | 20,110,391 | $ | 58,940,090 | ||||||||||||
Shares at December 31, 2013 | 11,165 | 6,674 | 11 | 342,573 | ─ | |||||||||||||||||||
Subscriptions | ─ | ─ | ─ | 30,845 | 195,994 | |||||||||||||||||||
Redemptions | (7,431 | ) | (551 | ) | ─ | (26,819 | ) | ─ | ||||||||||||||||
Shares at September 30, 2014 | 3,734 | 6,123 | 11 | 346,599 | 195,994 | |||||||||||||||||||
Net asset value per share: | ||||||||||||||||||||||||
September 30, 2014 | $ | 101.52 | $ | 118.73 | $ | 104.06 | $ | 108.84 | 102.61 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS’ INTEREST
MLM IndexTM Unleveraged Series
For the nine months ended September 30, 2013 (Unaudited)
Unleveraged Series | ||||||||||||||||||||
Class A Shares | Class B Shares | Class C Shares | Class D Shares | Total Unleveraged Series | ||||||||||||||||
Investors’ interest at December 31, 2012 | $ | 2,677,401 | $ | 3,111,377 | $ | 53,171 | $ | 32,572,328 | $ | 38,414,277 | ||||||||||
Subscriptions | ─ | ─ | ─ | 16,995,000 | 16,995,000 | |||||||||||||||
Redemptions | (1,001,617 | ) | (2,193,199 | ) | (50,416 | ) | (6,698,262 | ) | (9,943,494 | ) | ||||||||||
Net loss | (87,500 | ) | (73,680 | ) | (1,590 | ) | (1,238,376 | ) | (1,401,146 | ) | ||||||||||
Investors’ interest at September 30, 2013 | $ | 1,588,284 | $ | 844,498 | $ | 1,165 | $ | 41,630,690 | $ | 44,064,637 | ||||||||||
Shares at December 31, 2012 | 25,400 | 25,686 | 500 | 295,650 | ||||||||||||||||
Subscriptions | ─ | ─ | ─ | 156,624 | ||||||||||||||||
Redemptions | (9,669 | ) | (18,461 | ) | (489 | ) | (62,058 | ) | ||||||||||||
Shares at September 30, 2013 | 15,731 | 7,225 | 11 | 390,216 | ||||||||||||||||
Net asset value per share: | ||||||||||||||||||||
September 30, 2013 | $ | 100.97 | $ | 116.91 | $ | 102.52 | $ | 106.69 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
MLM IndexTM Unleveraged Series
For the nine months ended September 30, 2014 and 2013 (Unaudited)
September 30, 2014 | September 30, 2013 | |||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | 920,142 | $ | (1,401,146 | ) | |||
Adjustments to reconcile net income (loss) to net cash and cash equivalents used in operating activities | ||||||||
Net change in operating assets and liabilities | ||||||||
Due from broker | (4,075 | ) | 1,001,892 | |||||
Net unrealized gain on open futures contracts | (1,332,440 | ) | (47,330 | ) | ||||
Interest receivable | (170 | ) | (77,627 | ) | ||||
Brokerage commissions payable | 116 | 1,241 | ||||||
Management fee payable | 5,214 | 1,546 | ||||||
Accrued expenses | 213 | 9,709 | ||||||
Net cash and cash equivalents used in operating activities | (411,000 | ) | (511,715 | ) | ||||
Cash flows from financing activities | ||||||||
Subscriptions received, net of selling commissions | 22,874,401 | 15,075,000 | ||||||
Redemptions paid | (7,791,111 | ) | (10,000,703 | ) | ||||
Net cash and cash equivalents provided by financing activities | 15,083,290 | 5,074,297 | ||||||
Net increase in cash and cash equivalents | 14,672,290 | 4,562,582 | ||||||
Cash and cash equivalents at beginning of period | 38,783,078 | 36,597,519 | ||||||
Cash and cash equivalents at end of period | $ | 53,455,368 | $ | 41,160,101 | ||||
Supplemental disclosure of non-cash financing activities: | ||||||||
Redemptions payable | $ | 613,438 | $ | 353,916 | ||||
Subscriptions recorded which were received in advance | $ | ─ | $ | 1,950,000 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED STATEMENTS OF FINANCIAL CONDITION
As of September 30, 2014 (Unaudited) and December 31, 2013
ASSETS | September 30, 2014 | December 31, 2013 | ||||||
Cash and cash equivalents | $ | 9,672 | $ | 354,768 | ||||
Due from broker | 3,732,197 | 5,751,321 | ||||||
Net unrealized gain on open futures contracts, at fair value | 381,124 | 191,379 | ||||||
Total assets | $ | 4,122,993 | $ | 6,297,468 | ||||
LIABILITIES AND INVESTORS’ INTEREST | ||||||||
Liabilities | ||||||||
Redemptions payable | $ | 39,334 | $ | 1,818,018 | ||||
Brokerage commissions payable | 3,404 | 6,411 | ||||||
Management fee payable | 4,355 | 8,401 | ||||||
Accrued expenses | 1,650 | 1,398 | ||||||
Total liabilities | 48,743 | 1,834,228 | ||||||
Investors’ interest | 4,074,250 | 4,463,240 | ||||||
Total liabilities and investors’ interest | $ | 4,122,993 | $ | 6,297,468 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
MLM IndexTM Leveraged Series
September 30, 2014 (Unaudited)
Description | Number of contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Financial | 27 | $ | 240 | 0.01 | % | |||||||
Commodity | 4 | 14,410 | 0.35 | |||||||||
31 | 14,650 | 0.36 | ||||||||||
Short futures contracts | ||||||||||||
Financial | (34 | ) | 145,782 | 3.58 | ||||||||
Commodity | (66 | ) | 220,692 | 5.42 | ||||||||
(100 | ) | 366,474 | 9.00 | |||||||||
Net unrealized gain on open futures contracts, at fair value | $ | 381,124 | 9.36 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
MLM IndexTM Leveraged Series
December 31, 2013
Description | Number of contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Financial | 17 | $ | 52,113 | 1.17 | % | |||||||
Commodity | 18 | 2,638 | 0.06 | |||||||||
35 | 54,751 | 1.23 | ||||||||||
Short futures contracts | ||||||||||||
Financial | (52 | ) | 134,146 | 3.01 | ||||||||
Commodity | (55 | ) | 2,482 | 0.06 | ||||||||
(107 | ) | 136,628 | 3.07 | |||||||||
Net unrealized gain on open futures contracts, at fair value | $ | 191,379 | 4.30 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
MLM IndexTM Leveraged Series
For the three and nine months ended September 30, 2014 and 2013 (Unaudited)
For the three months ended September 30, 2014 | For the three months ended September 30, 2013 | For the nine months ended September 30, 2014 | For the nine months ended September 30, 2013 | |||||||||||||
Investment income | ||||||||||||||||
Interest | $ | 17 | $ | ─ | $ | 31 | $ | 2,561 | ||||||||
Expenses | ||||||||||||||||
Interest | ─ | 137 | ─ | ─ | ||||||||||||
Brokerage commissions | 10,783 | 25,810 | 35,374 | 116,924 | ||||||||||||
Management fee | 12,991 | 32,082 | 42,839 | 142,976 | ||||||||||||
Operating expenses | 4,451 | 9,182 | 14,621 | 44,539 | ||||||||||||
Total expenses | 28,225 | 67,211 | 92,834 | 304,439 | ||||||||||||
Net investment loss | (28,208 | ) | (67,211 | ) | (92,803 | ) | (301,878 | ) | ||||||||
Realized and unrealized gain (loss) on investments | ||||||||||||||||
Net realized gain (loss) on investments | 11,946 | 214,922 | 51,203 | (1,255,705 | ) | |||||||||||
Net change in unrealized appreciation and depreciation on investments | 313,549 | (213,295 | ) | 188,666 | 204,081 | |||||||||||
Net realized and unrealized gain (loss) on investments | 325,495 | 1,627 | 239,869 | (1,051,624 | ) | |||||||||||
Net gain (loss) | $ | 297,287 | $ | (65,584 | ) | $ | 147,066 | $ | (1,353,502 | ) |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS’ INTEREST
MLM IndexTM Leveraged Series
For the nine months ended September 30, 2014 (Unaudited)
Class A Shares | Class B Shares | Class C Shares | Class D Shares | Total Leveraged Series | ||||||||||||||||
Investors’ interest at December 31, 2013 | $ | 369,018 | $ | 1,118,984 | $ | 1,010 | $ | 2,974,228 | $ | 4,463,240 | ||||||||||
Subscriptions | ─ | ─ | ─ | ─ | ─ | |||||||||||||||
Redemptions | (260,250 | ) | (226,982 | ) | ─ | (48,824 | ) | (536,056 | ) | |||||||||||
Net (loss) income | (6,058 | ) | 27,160 | 38 | 125,926 | 147,066 | ||||||||||||||
Investors’ interest at September 30, 2014 | $ | 102,710 | $ | 919,162 | $ | 1,048 | $ | 3,051,330 | $ | 4,074,250 | ||||||||||
Shares at December 31, 2013 | 4,998 | 12,268 | 14 | 31,023 | ||||||||||||||||
Subscriptions | ─ | ─ | ─ | ─ | ||||||||||||||||
Redemptions | (3,641 | ) | (2,546 | ) | ─ | (513 | ) | |||||||||||||
Shares at September 30, 2014 | 1,357 | 9,722 | 14 | 30,510 | ||||||||||||||||
Net asset value per share: | ||||||||||||||||||||
September 30, 2014 | $ | 75.68 | $ | 94.55 | $ | 77.63 | $ | 100.02 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS’ INTEREST
MLM IndexTM Leveraged Series
For the nine months ended September 30, 2013 (Unaudited)
Class A Shares | Class B Shares | Class C Shares | Class D Shares | Total Leveraged Series | ||||||||||||||||
Investors’ interest at December 31, 2012 | $ | 1,823,994 | $ | 5,070,580 | $ | 1,075 | $ | 13,142,456 | $ | 20,038,105 | ||||||||||
Subscriptions | ─ | 90,000 | ─ | ─ | 90,000 | |||||||||||||||
Redemptions | (329,170 | ) | (2,921,997 | ) | ─ | (8,184,713 | ) | (11,435,880 | ) | |||||||||||
Net loss | (170,290 | ) | (341,140 | ) | (96 | ) | (841,976 | ) | (1,353,502 | ) | ||||||||||
Investors’ interest at September 30, 2013 | $ | 1,324,534 | $ | 1,897,443 | $ | 979 | $ | 4,115,767 | $ | 7,338,723 | ||||||||||
Shares at December 31, 2012 | 22,834 | 52,162 | 14 | 129,732 | ||||||||||||||||
Subscriptions | ─ | 926 | ─ | ─ | ||||||||||||||||
Redemptions | (4,405 | ) | (31,639 | ) | ─ | (85,375 | ) | |||||||||||||
Shares at September 30, 2013 | 18,429 | 21,449 | 14 | 44,357 | ||||||||||||||||
Net asset value per share: | ||||||||||||||||||||
September 30, 2013 | $ | 71.87 | $ | 88.47 | $ | 72.56 | $ | 92.79 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
MLM IndexTM Leveraged Series
For the nine months ended September 30, 2014 and 2013 (Unaudited)
September 30, 2014 | September 30, 2013 | |||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | 147,066 | $ | (1,353,502 | ) | |||
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by (used in)operating activities | ||||||||
Net change in operating assets and liabilities | ||||||||
Due from broker | 2,019,124 | 1,262,225 | ||||||
Net unrealized gain on open futures contracts | (189,745 | ) | (199,934 | ) | ||||
Interest receivable | ─ | 5 | ||||||
Other assets | ─ | 1,073 | ||||||
Brokerage commissions payable | (3,007 | ) | (12,080 | ) | ||||
Management fee payable | (4,046 | ) | (16,040 | ) | ||||
Accrued expenses | 252 | 699 | ||||||
Net cash and cash equivalents provided by (used in) operating activities | 1,969,644 | (317,554 | ) | |||||
Cash flows from financing activities | ||||||||
Subscriptions received, net of selling commissions | ─ | ─ | ||||||
Redemptions paid | (2,314,740 | ) | (12,646,741 | ) | ||||
Net cash and cash equivalents used in financing activities | (2,314,740 | ) | (12,646,741 | ) | ||||
Net decrease in cash and cash equivalents | (345,096 | ) | (12,964,295 | ) | ||||
Cash and cash equivalents at beginning of period | 354,768 | 14,038,218 | ||||||
Cash and cash equivalents at end of period | $ | 9,672 | $ | 1,073,923 | ||||
Supplemental disclosure of non-cash financing activities: | ||||||||
Redemptions payable | $ | 39,334 | $ | 21,509 | ||||
Subscriptions recorded which were received in advance | $ | ─ | $ | 90,000 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED STATEMENTS OF FINANCIAL CONDITION
As of September 30, 2014 (Unaudited) and December 31, 2013
ASSETS | September 30, 2014 | December 31, 2013 | ||||||
Cash and cash equivalents | $ | 126,587,694 | $ | 123,776,520 | ||||
Due from broker | 2,817,802 | 5,734,958 | ||||||
Net unrealized gain on open futures contracts, at fair value | 666,770 | 78,333 | ||||||
Interest receivable | 39 | 19 | ||||||
Total assets | $ | 130,072,305 | $ | 129,589,830 | ||||
LIABILITIES AND INVESTORS’ INTEREST | ||||||||
Liabilities | ||||||||
Brokerage commissions payable | 31,474 | 31,849 | ||||||
Management fee payable | 53,993 | 54,163 | ||||||
Accrued expenses | 24,708 | 24,721 | ||||||
Subscriptions received in advance | 250,000 | ─ | ||||||
Total liabilities | 360,175 | 110,733 | ||||||
Investors’ interest | 129,712,130 | 129,479,097 | ||||||
Total liabilities and investors’ interest | $ | 130,072,305 | $ | 129,589,830 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
MLM Commodity L/N Index Unleveraged Series
September 30, 2014 (Unaudited)
Description | Number of contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Commodity | 184 | $ | 666,770 | 0.51 | % | |||||||
Net unrealized gain on open futures contracts, at fair value | $ | 666,770 | 0.51 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
MLM Commodity L/N Index Unleveraged Series
December 31, 2013
Description | Number of contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Commodity | 676 | $ | 78,333 | 0.06 | % | |||||||
Net unrealized gain on open futures contracts, at fair value | $ | 78,333 | 0.06 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
Commodity L/N Unleveraged Series
For the three and nine months ended September 30, 2014 and 2013 (Unaudited)
For the three months ended September 30, 2014 | For the three months ended September 30, 2013 | For the nine months ended September 30, 2014 | For the nine months ended September 30, 2013 | |||||||||||||
Investment income | ||||||||||||||||
Interest | $ | 18,842 | $ | 14,736 | $ | 52,953 | $ | 55,385 | ||||||||
Expenses | ||||||||||||||||
Brokerage commissions | 98,229 | 95,152 | 296,711 | 275,419 | ||||||||||||
Management fee | 165,312 | 162,427 | 500,988 | 460,695 | ||||||||||||
Operating expenses | 140,389 | 138,949 | 424,675 | 388,156 | ||||||||||||
Total expenses | 403,930 | 396,528 | 1,222,374 | 1,124,270 | ||||||||||||
Net investment loss | (385,088 | ) | (381,792 | ) | (1,169,421 | ) | �� | (1,068,885 | ) | |||||||
Realized and unrealized (loss) gain on investments | ||||||||||||||||
Net realized (loss) gain on investments | (4,757,657 | ) | 1,348,420 | (2,885,410 | ) | (4,792,180 | ) | |||||||||
Net change in unrealized depreciation and appreciation on investments | (907,514 | ) | 541,685 | 587,864 | 301,091 | |||||||||||
Net realized and unrealized (loss) gain on investments | (5,665,171 | ) | 1,890,105 | (2,297,546 | ) | (4,491,089 | ) | |||||||||
Net (loss) income | $ | (6,050,259 | ) | $ | 1,508,313 | $ | (3,466,967 | ) | $ | (5,559,974 | ) |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS’ INTEREST
MLM Commodity L/N Index Unleveraged Series
For the nine months ended September 30, 2014 (Unaudited)
Class D Shares | Class E Shares | Total Commodity L/N Unleveraged Series | ||||||||||
Investors’ interest at December 31, 2013 | $ | 74,744,967 | $ | 54,734,130 | $ | 129,479,097 | ||||||
Subscriptions | 3,700,000 | ─ | 3,700,000 | |||||||||
Net loss | (2,135,095 | ) | (1,331,872 | ) | (3,466,967 | ) | ||||||
Investors’ interest at September 30, 2014 | $ | 76,309,872 | $ | 53,402,258 | $ | 129,712,130 | ||||||
Shares at December 31, 2013 | 819,002 | 618,735 | ||||||||||
Subscriptions | 39,614 | ─ | ||||||||||
Shares at September 30, 2014 | 858,616 | 618,735 | ||||||||||
Net asset value per share: | ||||||||||||
September 30, 2014 | $ | 88.88 | $ | 86.31 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS’ INTEREST
MLM Commodity L/N Index Unleveraged Series
For the nine months ended September 30, 2013 (Unaudited)
Class D Shares | Class E Shares | Total Commodity L/N Unleveraged Series | ||||||||||
Investors’ interest at December 31, 2012 | $ | 71,782,634 | $ | 37,485,428 | $ | 109,268,062 | ||||||
Subscriptions | 5,523,122 | 20,015,348 | 25,538,470 | |||||||||
Net loss | (3,440,809 | ) | (2,119,165 | ) | (5,559,974 | ) | ||||||
Investors’ interest at September 30, 2013 | $ | 73,864,947 | $ | 55,381,611 | $ | 129,246,558 | ||||||
Shares at December 31, 2012 | 740,605 | 400,000 | ||||||||||
Subscriptions | 58,790 | 218,735 | ||||||||||
Shares at September 30, 2013 | 799,395 | 618,735 | ||||||||||
Net asset value per share: | ||||||||||||
September 30, 2013 | $ | 92.40 | $ | 89.51 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
MLM Commodity L/N Index Unleveraged Series
For the nine months ended September 30, 2014 and 2013 (Unaudited)
September 30, 2014 | September 30, 2013 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (3,466,967 | ) | $ | (5,559,974 | ) | ||
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities | ||||||||
Net change in operating assets and liabilities | ||||||||
Due from broker | 2,917,156 | 4,211,776 | ||||||
Net unrealized gain on open futures contracts | (588,437 | ) | (308,012 | ) | ||||
Interest receivable | (20 | ) | (93,161 | ) | ||||
Brokerage commissions payable | (375 | ) | 4,621 | |||||
Management fee payable | (170 | ) | 8,327 | |||||
Accrued expenses | (13 | ) | 33,707 | |||||
Net cash and cash equivalents used in operating activities | (1,138,826 | ) | (1,702,716 | ) | ||||
Cash flows from financing activities | ||||||||
Subscriptions received, net of selling commissions | 3,950,000 | 25,538,470 | ||||||
Net cash and cash equivalents provided by financing activities | 3,950,000 | 25,538,470 | ||||||
Net increase in cash and cash equivalents | 2,811,174 | 23,835,754 | ||||||
Cash and cash equivalents at beginning of period | 123,776,520 | 100,936,268 | ||||||
Cash and cash equivalents at end of period | $ | 126,587,694 | $ | 124,772,022 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED STATEMENTS OF FINANCIAL CONDITION
As of September 30, 2014 (Unaudited) and December 31, 2013
ASSETS | September 30, 2014 | December 31, 2013 | ||||||
Cash and cash equivalents | $ | 37,738,322 | $ | 32,852,364 | ||||
Due from broker | 3,224,374 | 4,620,026 | ||||||
Net unrealized gain on open futures contracts, at fair value | 3,385,079 | 134,376 | ||||||
Interest receivable | 42 | 1 | ||||||
Total assets | $ | 44,347,817 | $ | 37,606,767 | ||||
LIABILITIES AND INVESTORS’ INTEREST | ||||||||
Liabilities | ||||||||
Brokerage commissions payable | 12,207 | 12,046 | ||||||
Management fee payable | 17,255 | 15,812 | ||||||
Accrued expenses | 6,940 | 6,833 | ||||||
Total liabilities | 36,402 | 34,691 | ||||||
Investors’ interest | 44,311,415 | 37,572,076 | ||||||
Total liabilities and investors’ interest | $ | 44,347,817 | $ | 37,606,767 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
MLM Commodity L/S Index Unleveraged Series
September 30, 2014 (Unaudited)
Description | Number of contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Commodity | 61 | $ | 222,020 | 0.50 | % | |||||||
Short futures contracts | ||||||||||||
Commodity | (971 | ) | 3,163,059 | 7.14 | ||||||||
Net unrealized gain on open futures contracts, at fair value | $ | 3,385,079 | 7.64 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
MLM Commodity L/S Index Unleveraged Series
December 31, 2013
Description | Number of contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Commodity | 197 | $ | 21,828 | 0.06 | % | |||||||
Short futures contracts | ||||||||||||
Commodity | (625 | ) | 112,548 | 0.30 | ||||||||
Net unrealized gain on open futures contracts, at fair value | $ | 134,376 | 0.36 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
MLM Commodity L/S Index Unleveraged Series
For the three and nine months ended September 30, 2014 and 2013 (Unaudited)
For the three months ended September 30, 2014 | For the three months ended September 30, 2013 | For the nine months ended September 30, 2014 | For the nine months ended September 30, 2013 | |||||||||||||
Investment income | ||||||||||||||||
Interest | $ | 5,071 | $ | 3,550 | $ | 13,556 | $ | 19,417 | ||||||||
Expenses | ||||||||||||||||
Brokerage commissions | 38,373 | 38,085 | 113,398 | 125,716 | ||||||||||||
Management fee | 47,966 | 47,604 | 141,747 | 157,145 | ||||||||||||
Operating expenses | 40,439 | 40,289 | 119,912 | 133,692 | ||||||||||||
Total expenses | 126,778 | 125,978 | 375,057 | 416,553 | ||||||||||||
Net investment loss | (121,707 | ) | (122,428 | ) | (361,501 | ) | (397,136 | ) | ||||||||
Realized and unrealized gain (loss) on investments | ||||||||||||||||
Net realized (loss) gain on investments | (542,367 | ) | 476,242 | (1,374,300 | ) | (2,276,495 | ) | |||||||||
Net change in unrealized appreciation on investments | 2,921,636 | (233,770 | ) | 3,250,140 | 986,310 | |||||||||||
Net realized and unrealized gain (loss) on investments | 2,379,269 | 242,472 | 1,875,840 | (1,290,185 | ) | |||||||||||
Net gain (loss) | $ | 2,257,562 | $ | 120,044 | $ | 1,514,339 | $ | (1,687,321 | ) |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS’ INTEREST
MLM Commodity L/S Index Unleveraged Series
For the nine months ended September 30, 2014 (Unaudited)
Total Commodity L/S Unleveraged Series | ||||
Investors’ interest at December 31, 2013 | $ | 37,572,076 | ||
Subscriptions | 5,225,000 | |||
Net income | 1,514,339 | |||
Investors’ interest at September 30, 2014 | $ | 44,311,415 | ||
Shares at December 31, 2013 | 441,627 | |||
Subscriptions | 63,740 | |||
Shares at September 30, 2014 | 505,367 | |||
Net asset value per share: | ||||
September 30, 2014 | $ | 87.68 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS’ INTEREST
MLM Commodity L/S Index Unleveraged Series
For the nine months ended September 30, 2013 (Unaudited)
Total Commodity L/S Unleveraged Series | ||||
Investors’ interest at December 31, 2012 | $ | 46,937,636 | ||
Subscriptions | 11,500,000 | |||
Redemptions | (19,038,470 | ) | ||
Net loss | (1,687,321 | ) | ||
Investors’ interest at September 30, 2013 | $ | 37,711,845 | ||
Shares at December 31, 2012 | 530,192 | |||
Subscriptions | 133,049 | |||
Redemptions | (223,267 | ) | ||
Shares at September 30, 2013 | 439,974 | |||
Net asset value per share: | ||||
September 30, 2013 | $ | 85.71 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
MLM Commodity L/S Index Unleveraged Series
For the nine months ended September 30, 2014 and 2013 (Unaudited)
September 30, 2014 | September 30, 2013 | |||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | 1,514,339 | $ | (1,687,321 | ) | |||
Adjustments to reconcile net income (loss) to net cash and cash equivalents used in operating activities | ||||||||
Net change in operating assets and liabilities | ||||||||
Due from broker | 1,395,652 | (698,528 | ) | |||||
Net unrealized gain on open futures contracts | (3,250,703 | ) | (989,724 | ) | ||||
Interest receivable | (41 | ) | (30,908 | ) | ||||
Brokerage commissions payable | 161 | (3,402 | ) | |||||
Management fee payable | 1,443 | (4,100 | ) | |||||
Accrued expenses | 107 | 9,649 | ||||||
Net cash and cash equivalents used in operating activities | (339,042 | ) | (3,404,334 | ) | ||||
Cash flows from financing activities | ||||||||
Subscriptions received, net of selling commissions | 5,225,000 | 11,500,000 | ||||||
Redemptions paid | ─ | (19,038,470 | ) | |||||
Net cash and cash equivalents provided by (used in) financing activities | 5,225,000 | (7,538,470 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 4,885,958 | (10,942,804 | ) | |||||
Cash and cash equivalents at beginning of period | 32,852,364 | 43,740,617 | ||||||
Cash and cash equivalents at end of period | $ | 37,738,322 | $ | 32,797,813 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED STATEMENTS OF FINANCIAL CONDITION
As of September 30, 2014 (Unaudited) and December 31, 2013
ASSETS | September 30, 2014 | December 31, 2013 | ||||||
Cash and cash equivalents | $ | 217,791,056 | $ | 195,766,730 | ||||
Due from broker | 14,006,845 | 20,334,702 | ||||||
Net unrealized gain on open futures contracts, at fair value | 6,346,661 | 985,336 | ||||||
Interest receivable | 258 | 27 | ||||||
Total assets | $ | 238,144,820 | $ | 217,086,795 | ||||
LIABILITIES AND INVESTORS’ INTEREST | ||||||||
Liabilities | ||||||||
Redemptions payable | $ | 652,772 | $ | 6,546,302 | ||||
Brokerage commissions payable | 61,795 | 64,900 | ||||||
Management fee payable | 100,205 | 97,764 | ||||||
Subscriptions received in advance | 250,000 | ─ | ||||||
Accrued expenses | 42,163 | 41,604 | ||||||
Total liabilities | 1,106,935 | 6,750,570 | ||||||
Investors’ interest | 237,037,885 | 210,336,225 | ||||||
Total liabilities and investors’ interest | $ | 238,144,820 | $ | 217,086,795 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
Trust Total
September 30, 2014 (Unaudited)
Description | Number of contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Financial | 164 | $ | 12,355 | 0.01 | % | |||||||
Commodity | 270 | 979,910 | 0.41 | |||||||||
434 | 992,265 | 0.42 | ||||||||||
Short futures contracts | ||||||||||||
Financial | (205 | ) | 894,013 | 0.38 | ||||||||
Commodity | (1,364 | ) | 4,460,383 | 1.88 | ||||||||
(1,569 | ) | 5,354,396 | 2.26 | |||||||||
Net unrealized gain on open futures contracts, at fair value | $ | 6,346,661 | 2.68 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
CONDENSED SCHEDULE OF INVESTMENTS
Trust Total
December 31, 2013
Description | Number of contracts | Unrealized gain | Percentage of investors’ interest | |||||||||
Futures* | ||||||||||||
Long futures contracts | ||||||||||||
Financial | 67 | $ | 216,333 | 0.10 | % | |||||||
Commodity | 941 | 108,004 | 0.05 | |||||||||
1,008 | 324,337 | 0.15 | ||||||||||
Short futures contracts | ||||||||||||
Financial | (204 | ) | 526,576 | 0.25 | ||||||||
Commodity | (840 | ) | 134,423 | 0.06 | ||||||||
(1,044 | ) | 660,999 | 0.31 | |||||||||
Net unrealized gain on open futures contracts, at fair value | $ | 985,336 | 0.46 | % |
* Derivatives are not designated as hedging instruments.
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
Trust Total
For the three and nine months ended September 30, 2014 and 2013 (Unaudited)
For the three months ended September 30, 2014 | For the three months ended September 30, 2013 | For the nine months ended September 30, 2014 | For the nine months ended September 30, 2013 | |||||||||||||
Investment income | ||||||||||||||||
Interest | $ | 29,139 | $ | 21,979 | $ | 80,109 | $ | 95,329 | ||||||||
Expenses | ||||||||||||||||
Interest | ─ | 137 | ─ | ─ | ||||||||||||
Brokerage commissions | 194,391 | 207,821 | 571,065 | 663,034 | ||||||||||||
Management fee | 299,743 | 303,706 | 856,900 | 941,163 | ||||||||||||
Operating expenses | 244,415 | 239,085 | 702,506 | 714,422 | ||||||||||||
Total expenses | 738,549 | 750,749 | 2,130,471 | 2,318,619 | ||||||||||||
Net investment loss | (709,410 | ) | (728,770 | ) | (2,050,362 | ) | (2,223,290 | ) | ||||||||
Realized and unrealized (loss) gain on investments | ||||||||||||||||
Net realized (loss) gain on investments | (5,340,770 | ) | 2,397,432 | (4,183,646 | ) | (9,322,783 | ) | |||||||||
Net change in unrealized appreciation and depreciation on investments | 4,042,333 | (305,401 | ) | 5,348,588 | 1,544,130 | |||||||||||
Net realized and unrealized (loss) gain on investments | (1,298,437 | ) | 2,092,031 | 1,164,942 | (7,778,653 | ) | ||||||||||
Net (loss) income | $ | (2,007,847 | ) | $ | 1,363,261 | $ | (885,420 | ) | $ | (10,001,943 | ) |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS INTEREST
Trust Total
For the nine months ended September 30, 2014 (Unaudited)
Total investor interest | ||||
Investors’ interest at December 31, 2013 | $ | 210,336,225 | ||
Subscriptions | 31,799,401 | |||
Redemptions | (4,212,321 | ) | ||
Net loss | (885,420 | ) | ||
Investors’ interest at September 30, 2014 | $ | 237,037,885 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CHANGES IN INVESTORS INTEREST
Trust Total
For the nine months ended September 30, 2013 (Unaudited)
Total investor interest ($100 par value per share) | ||||
Investors’ interest at December 31, 2012 | $ | 214,658,080 | ||
Subscriptions | 54,123,470 | |||
Redemptions | (40,417,844 | ) | ||
Net loss | (10,001,943 | ) | ||
Investors’ interest at September 30, 2013 | $ | 218,361,763 |
See Notes to Unaudited Condensed Financial Statements.
MLM INDEX™ FUND
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
Trust Total
For the nine months ended September 30, 2014 and 2013 (Unaudited)
September 30, 2014 | September 30, 2013 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (885,420 | ) | $ | (10,001,943 | ) | ||
Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in)operating activities | ||||||||
Net change in operating assets and liabilities | ||||||||
Due from broker | 6,327,857 | 5,777,365 | ||||||
Net unrealized gain on open futures contracts | (5,361,325 | ) | (1,545,000 | ) | ||||
Interest receivable | (231 | ) | (201,691 | ) | ||||
Other assets | ─ | 1,073 | ||||||
Brokerage commissions payable | (3,105 | ) | (9,620 | ) | ||||
Management fee payable | 2,441 | (10,267 | ) | |||||
Accrued expenses | 559 | 53,764 | ||||||
Net cash and cash equivalents provided by (used in) operating activities | 80,776 | (5,936,319 | ) | |||||
Cash flows from financing activities | ||||||||
Subscriptions received, net of selling commissions | 32,049,401 | 52,113,470 | ||||||
Redemptions paid | (10,105,851 | ) | (41,685,914 | ) | ||||
Net cash and cash equivalents provided by financing activities | 21,943,550 | 10,427,556 | ||||||
Net increase in cash and cash equivalents | 22,024,326 | 4,491,237 | ||||||
Cash and cash equivalents at beginning of period | 195,766,730 | 195,312,622 | ||||||
Cash and cash equivalents at end of period | $ | 217,791,056 | $ | 199,803,859 | ||||
Supplemental disclosure of non-cash financing activities: | ||||||||
Redemptions payable | $ | 652,772 | $ | 375,425 | ||||
Subscriptions recorded which were received in advance | $ | 0 | $ | 2,040,000 |
See Notes to Unaudited Condensed Financial Statements.
MLM Index ™ Fund
September 30, 2014
The following discussion of the notes to financial statements is applicable to both the MLM Index Fund and each of its Series (the MLM Index Unleveraged Series, the MLM Index Leveraged Series, the MLM Commodity L/N Index Unleveraged Series and the MLM Commodity L/S Index Unleveraged Series).
1. Organization
MLM Index™ Fund was formed under the Business Trust Statute of the State of Delaware as a business trust in December 1997 and commenced operations on January 4, 1999. The MLM Index™ Fund was organized for the primary purpose of seeking capital appreciation through the speculative trading of a diversified portfolio of futures contracts using the MLM Index™ Trading Program, which is based upon the MLM Index™ (the “Index”). The Index is a benchmark of the hypothetical returns available to a futures investor. The Index is comprised of a diverse portfolio of futures markets, including both financial and tangible markets.
At September 30, 2014, the MLM Index™ Fund is comprised of four series: the MLM Index™ Unleveraged Series (“Unleveraged Series”), the MLM Index™ Leveraged Series (“Leveraged Series”), the MLM Commodity L/N Index Unleveraged Series (“Commodity L/N” or “Commodity L/N Unleveraged Series”) and the MLM Commodity L/S Index Unleveraged Series (“Commodity L/S” or “Commodity L/S Unleveraged Series”). MLM Index™ Fund and its series are collectively referred to herein as the “Trust”.
Mount Lucas Management LP (the “Manager”) is the Manager for the Trust and its Series. The Manager is a registered investment advisor under the Investment Advisers Act of 1940, is registered as a Commodity Pool Operator and a Commodity Trading Advisor with the Commodity Futures Trading Commission and is a member of the National Futures Association.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Trust is comprised of four series: the Unleveraged Series, which attempts to replicate the Index without leverage, the Leveraged Series, which attempts to replicate the Index at three times leverage, the Commodity L/N Unleveraged Series which attempts to replicate the MLM Commodity Long/Neutral Index without leverage and the MLM Commodity L/S Unleveraged Series which attempts to replicate the MLM Commodity Long/Short Index without leverage (collectively, the “Series”). The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP). The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been omitted. In the opinion of the Manager, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial positions of the Trust and each Series as of September 30, 2014 and the results of its operations for the three and nine months ended September 30, 2014 and 2013. The operating results for these interim periods may not be indicative of the results expected for a full year. These financial statements should be read in conjunction with the audited financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2013.
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
2. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid financial instruments with maturities of three months or less, when purchased. Certain of each Series' cash at broker is restricted to meet margin requirements (see Note 5).
Due from Broker
Each Series' trading activities utilize one broker located in the United States. Due from broker represents cash balances held, and amounts receivable or payable for transactions not settled at September 30, 2014 and December 31, 2013.
Fair Value Measurements
Each Series has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded on the statement of assets and liabilities are categorized based on the inputs to the valuation techniques as follows:
Level 1:
Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market (examples include active exchange-traded equity securities, listed derivatives, most U.S. government and agency securities, and certain other sovereign government obligations).
Level 2:
Financial assets and liabilities whose values are based on the following:
a) | Quoted prices for similar assets or liabilities in active markets (for example, restricted stock); |
b) | Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently); |
c) | Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and |
d) | Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability (for example, certain mortgage loans). |
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
2. Summary of Significant Accounting Policies (continued)
Fair Value Measurements (continued)
Level 3:
Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include private equity investments, certain commercial mortgage whole loans and long-dated or complex derivatives, including certain foreign exchange options and long-dated options on gas and power).
As required by US GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of September 30, 2014 and December 31, 2013, all of the derivative instruments held by the Trust are fair valued based on quoted prices in active markets (Level 1).
Each Series' trading positions are valued at fair value and cash equivalents are carried at their net asset value per share including accrued interest, as applicable. All positions including the net unrealized appreciation or depreciation are included under the caption “net unrealized gain/(loss) on open futures contracts” on the statements of financial condition. Fair value is principally based on quoted market prices or broker or dealer price quotations. The resulting change in unrealized profit or loss is reflected in net gain (loss) on change in unrealized appreciation (depreciation) on investments on the statements of operations.
Investment Transactions and Investment Income
All securities transactions are recorded on a trade-date basis. Realized gain and loss are recorded using specific identification method. Interest income is recorded using the accrual basis of accounting.
Income Taxes
Each of the Series of the Trust is classified for Federal income tax purposes as a separate partnership. Investors in each Series will reflect their proportionate share of realized profit or loss on their separate tax returns. Accordingly, no provisions for income taxes are required for the Trust or any Series.
All of the Series of the Trust recognize tax benefits or expenses of uncertain tax positions in the year such determination is made when the positions were “more likely than not” to be sustained assuming examination by tax authorities. The Manager has reviewed all of the Series of the Trust’s tax positions for all open years (after December 31, 2010) and concluded that no provision for unrecognized tax benefits or expense is required in these financial statements. The Trust has elected an accounting policy to classify interest and penalties related to unrecognized tax benefits as interest or other expense. The 2011 through 2013 tax years generally remain subject to examination by U.S. federal and most state tax authorities.
Redemptions Payable
For purposes of both financial reporting and calculation of redemption value, Net Asset Value per unit is calculated by dividing Net Asset Value of each Series by the number of outstanding investors’ interests for that Series.
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
3. Cash and Cash Equivalents
The Trust’s cash and cash equivalents consisted of:
September 30, 2014 | Unleveraged Series | Leveraged Series | Commodity L/N Unleveraged Series | Commodity L/S Unleveraged Series | Trust Total | |||||||||||||||
Institutional Treasury Money Market Fund | $ | 21,447,000 | $ | 3,000 | $ | 4,886,000 | $ | 5,112,000 | $ | 31,448,000 | ||||||||||
U.S. Government Agency Securities | 31,898,873 | ─ | 121,591,310 | 32,529,125 | 186,019,308 | |||||||||||||||
Cash | 108,051 | 4,903 | 108,486 | 96,068 | 317,508 | |||||||||||||||
Cash in Checking Account | 1,444 | 1,769 | 1,898 | 1,129 | 6,240 | |||||||||||||||
Total | $ | 53,455,368 | $ | 9,672 | $ | 126,587,694 | $ | 37,738,322 | $ | 217,791,056 |
December 31, 2013 | Unleveraged Series | Leveraged Series | Commodity L/N Unleveraged Series | Commodity L/S Unleveraged Series | Trust Total | |||||||||||||||
Institutional Treasury Money Market Fund | $ | 293,000 | $ | 4,000 | $ | 2,127,000 | $ | 66,000 | $ | 2,490,000 | ||||||||||
U.S. Government Agency Securities | 38,439,414 | 299,995 | 121,557,716 | 32,694,535 | 192,991,660 | |||||||||||||||
Cash | 48,922 | 48,951 | 89,866 | 90,574 | 278,313 | |||||||||||||||
Cash in Checking Account | 1,742 | 1,822 | 1,938 | 1,255 | 6,757 | |||||||||||||||
Total | $ | 38,783,078 | $ | 354,768 | $ | 123,776,520 | $ | 32,852,364 | $ | 195,766,730 |
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
4. Investors’ Interest
The Trust is comprised of four series: the Unleveraged Series, which attempts to replicate the Index without leverage, the Leveraged Series, which attempts to replicate the Index at three times leverage, the Commodity L/N Unleveraged Series which attempts to replicate the MLM Commodity Long/Neutral Index without leverage and the Commodity L/S Unleveraged Series which attempts to replicate the MLM Commodity Long/Short Index without leverage (collectively, the “Series”). The MLM Commodity L/S Index is a subset of the MLM Index and contains only the commodity futures contracts of the entire MLM Index. The MLM Commodity L/N Index contains the same commodity futures contracts, but does not have short positions when the MLM Index algorithm indicates a short position in a particular contract. Class A, Class B, Class C, Class D and Class E shares are sold by authorized selling agents appointed by the Manager to accredited investors at a price equal to each Class’s net asset value. Shares may be redeemed at net asset value as of the last day of any month upon at least ten business days’ written notice to the Manager. As of September 30, 2014, the Commodity L/N Leveraged Series and the Commodity L/S Leveraged Series have not commenced trading and have no assets. In addition, as of September 30, 2014, the Commodity L/N Unleveraged Series and the Commodity L/S Unleveraged Series have never had any investors in classes A, B or C. Furthermore, as of September 30, 2014, the Leveraged Series and the Commodity L/S Unleveraged Series have never had any investors in class E.
The Manager allocates profits and losses among the investors of a Series based on the balance in each investor’s capital account.
The Class A and Class C shares are subject to a sales commission of 0% to 4% of the subscription amount, payable to the selling agent from the investor’s investment for each series. The amount of the sales commission will be determined by the selling agent.
5. Margin Requirements
The Trust had margin requirements as follows at September 30, 2014 and December 31, 2013:
September 30, 2014 | December 31, 2013 | |||||||
Unleveraged Series | $ | 1,217,968 | $ | 788,023 | ||||
Leveraged Series | 241,144 | 266,992 | ||||||
Commodity L/N Unleveraged Series | 242,880 | 1,530,033 | ||||||
Commodity L/S Unleveraged Series | 1,888,040 | 1,615,519 | ||||||
Total | $ | 3,590,032 | $ | 4,200,567 |
Each Series' margin requirements were satisfied by net unrealized profits and cash at the broker.
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
6. Management Fee and Other Fees and Expenses
Each Series pays the Manager a management fee as a percentage of net assets, as of the first day of each month at the annualized rates as follows:
Prior to May 1, 2013:
Unleveraged, Commodity L/N Unleveraged Series, and Commodity L/S Unleveraged Series | ||||||||||||||||||||||||
Brokerage fee | Management fee | Organizational fee | Operating expense | Selling expense | Total fees and commissions | |||||||||||||||||||
Class A | 0.85 | % | 1.50 | % | N/ | A | 0.35 | % | 4.00 | % | 6.70 | % | ||||||||||||
Class B | 0.85 | % | 0.50 | % | N/ | A | 0.35 | % | N/ | A | 1.70 | % | ||||||||||||
Class C | 0.40 | % | 1.00 | % | N/ | A | 0.35 | % | 4.00 | % | 5.75 | % | ||||||||||||
Class D | 0.40 | % | 0.50 | % | N/ | A | 0.35 | % | N/ | A | 1.25 | % | ||||||||||||
Class E | 0.15 | % | 0.50 | % | N/ | A | 0.35 | % | N/ | A | 1.00 | % |
Leveraged Series | ||||||||||||||||||||||||
Brokerage fee | Management fee | Organizational fee | Operating expense | Selling expense | Total fees and commissions | |||||||||||||||||||
Class A | 1.75 | % | 2.80 | % | N/ | A | 0.35 | % | 4.00 | % | 8.90 | % | ||||||||||||
Class B | 1.75 | % | 1.30 | % | N/ | A | 0.35 | % | N/ | A | 3.40 | % | ||||||||||||
Class C | 0.90 | % | 2.05 | % | N/ | A | 0.35 | % | 4.00 | % | 7.30 | % | ||||||||||||
Class D | 0.90 | % | 1.30 | % | N/ | A | 0.35 | % | N/ | A | 2.55 | % | ||||||||||||
Class E | 0.35 | % | 1.30 | % | N/ | A | 0.35 | % | N/ | A | 2.00 | % |
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
6. Management Fee and Other Fees and Expenses (continued)
Effective May 1, 2013:
Unleveraged, Commodity L/N Unleveraged Series, and Commodity L/S Unleveraged Series | ||||||||||||||||||||||||
Brokerage fee | Management fee | Organizational fee | Operating expense | Selling expense | Total fees and commissions | |||||||||||||||||||
Class A | N/A | * | 2.70 | % | N/ | A | N/A | * | 4.00 | % | 6.70 | % | ||||||||||||
Class B | N/A | * | 1.70 | % | N/ | A | N/A | * | N/ | A | 1.70 | % | ||||||||||||
Class C | N/A | * | 1.75 | % | N/ | A | N/A | * | 4.00 | % | 5.75 | % | ||||||||||||
Class D | N/A | * | 1.25 | % | N/ | A | N/A | * | N/ | A | 1.25 | % | ||||||||||||
Class E | N/A | * | 1.00 | % | N/ | A | N/A | * | N/ | A | 1.00 | % |
Leveraged Series | ||||||||||||||||||||||||
Brokerage fee | Management fee | Organizational fee | Operating expense | Selling expense | Total fees And commissions | |||||||||||||||||||
Class A | N/A | * | 4.90 | % | N/ | A | N/A | * | 4.00 | % | 8.90 | % | ||||||||||||
Class B | N/A | * | 3.40 | % | N/ | A | N/A | * | N/ | A | 3.40 | % | ||||||||||||
Class C | N/A | * | 3.30 | % | N/ | A | N/A | * | 4.00 | % | 7.30 | % | ||||||||||||
Class D | N/A | * | 2.55 | % | N/ | A | N/A | * | N/ | A | 2.55 | % | ||||||||||||
Class E | N/A | * | 2.00 | % | N/ | A | N/A | * | N/ | A | 2.00 | % |
* Effective May 1, 2013, brokerage fee and operating expenses are included in the management fee charged by the Manager. The total of Brokerage fee, Management fee and Operating expense fee is unchanged and presented separately in the statement of operations.
Each Series pays the cash manager and banking fees directly.
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
7. Derivative Financial Instruments
Derivatives are subject to various risks similar to non-derivative financial instruments including market, credit, liquidity and operational risk. The risks of derivatives should not be viewed in isolation but rather should be considered on an aggregate basis along with the Trust’s other trading-related activities.
Each Series purchases and sells futures in financial instruments and commodities. Each Series records its derivative activities on a mark-to-market basis with realized and unrealized gains (losses) recognized currently in the statements of operations and in due from brokers on the statements of financial condition.
The following tables reflect the fair value of each Series derivative financial instruments at September 30, 2014 and December 31, 2013:
September 30, 2014 | December 31, 2013 | |||||||||||||||
Unleveraged Series | Asset | Liability | Asset | Liability | ||||||||||||
Financial futures | $ | 830,104 | $ | (69,758 | ) | $ | 572,412 | $ | (15,762 | ) | ||||||
Commodity futures | 1,228,395 | (75,053 | ) | 238,206 | (213,608 | ) | ||||||||||
Total | $ | 2,058,499 | $ | (144,811 | ) | $ | 810,618 | $ | (229,370 | ) |
September 30, 2014 | December 31, 2013 | |||||||||||||||
Leveraged Series | Asset | Liability | Asset | Liability | ||||||||||||
Financial futures | $ | 160,956 | $ | (14,934 | ) | $ | 194,140 | $ | (7,881 | ) | ||||||
Commodity futures | 249,463 | (14,361 | ) | 78,556 | (73,436 | ) | ||||||||||
Total | $ | 410,419 | $ | (29,295 | ) | $ | 272,696 | $ | (81,317 | ) |
September 30, 2014 | December 31, 2013 | |||||||||||||||
Commodity L/N Unleveraged Series | Asset | Liability | Asset | Liability | ||||||||||||
Commodity futures | $ | 666,770 | $ | ─ | $ | 275,213 | $ | (196,880 | ) | |||||||
Total | $ | 666,770 | $ | ─ | $ | 275,213 | $ | (196,880 | ) |
September 30, 2014 | December 31, 2013 | |||||||||||||||
Commodity L/S Unleveraged Series | Asset | Liability | Asset | Liability | ||||||||||||
Commodity futures | $ | 3,582,607 | $ | (197,528 | ) | $ | 946,194 | $ | (811,818 | ) | ||||||
Total | $ | 3,582,607 | $ | (197,528 | ) | $ | 946,194 | $ | (811,818 | ) |
September 30, 2014 | December 31, 2013 | |||||||||||||||
Trust Total | Asset | Liability | Asset | Liability | ||||||||||||
Financial futures | $ | 991,060 | $ | (84,692 | ) | $ | 766,552 | $ | (23,643 | ) | ||||||
Commodity futures | 5,727,235 | (286,942 | ) | 1,538,169 | (1,295,742 | ) | ||||||||||
Total | $ | 6,718,295 | $ | (371,634 | ) | $ | 2,304,721 | $ | (1,319,385 | ) |
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
7. Derivative Financial Instruments (continued)
The following tables reflect the realized and unrealized gains (losses) from derivative financial instruments for the three and nine months ended September 30, 2014 and 2013. (Included in the unrealized gain (loss) amounts on the Condensed Statement of Operations for September 30, 2014 and 2013, are unrealized gains (losses) from U.S. Government Agency Securities and unrealized gains (losses) from currency positions.):
Three months ended September 30, 2014 | Three months ended September 30, 2013 | |||||||||||||||||||||||
Unleveraged | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Financial futures | $ | 190,537 | $ | 690,674 | $ | 881,211 | $ | 177,709 | $ | (301,242 | ) | $ | (123,533 | ) | ||||||||||
Commodity futures | (243,229 | ) | 1,038,864 | 795,635 | 180,139 | (98,332 | ) | 81,807 | ||||||||||||||||
Total | $ | (52,692 | ) | $ | 1,729,538 | $ | 1,676,846 | $ | 357,848 | $ | (399,574 | ) | $ | (41,726 | ) |
Three months ended September 30, 2014 | Three months ended September 30, 2013 | |||||||||||||||||||||||
Leveraged | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Financial futures | $ | 58,326 | $ | 120,498 | $ | 178,824 | $ | 105,806 | $ | (169,569 | ) | $ | (63,763 | ) | ||||||||||
Commodity futures | (46,380 | ) | 196,911 | 150,531 | 109,116 | (42,115 | ) | 67,001 | ||||||||||||||||
Total | $ | 11,946 | $ | 317,409 | $ | 329,355 | $ | 214,922 | $ | (211,684 | ) | $ | 3,238 |
Three months ended September 30, 2014 | Three months ended September 30, 2013 | |||||||||||||||||||||||
Commodity L/N | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Commodity futures | $ | (4,757,657 | ) | $ | (908,249 | ) | $ | (5,665,906 | ) | $ | 1,348,420 | $ | 543,354 | $ | 1,891,774 | |||||||||
Total | $ | (4,757,657 | ) | $ | (908,249 | ) | $ | (5,665,906 | ) | $ | 1,348,420 | $ | 543,354 | $ | 1,891,774 |
Three months ended September 30, 2014 | Three months ended September 30, 2013 | |||||||||||||||||||||||
Commodity L/S | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Commodity futures | $ | (542,367 | ) | $ | 2,921,711 | $ | 2,379,344 | $ | 476,242 | $ | (232,884 | ) | $ | 243,358 | ||||||||||
Total | $ | (542,367 | ) | $ | 2,921,711 | $ | 2,379,344 | $ | 476,242 | $ | (232,884 | ) | $ | 243,358 |
Three months ended September 30, 2014 | Three months ended September 30, 2013 | |||||||||||||||||||||||
Trust Total | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Financial futures | $ | 248,863 | $ | 811,172 | $ | 1,060,035 | $ | 283,515 | $ | (470,811 | ) | $ | (187,296 | ) | ||||||||||
Commodity futures | (5,589,633 | ) | 3,249,237 | (2,340,396 | ) | 2,113,917 | 170,023 | 2,283,940 | ||||||||||||||||
Total | $ | (5,340,770 | ) | $ | 4,060,409 | $ | (1,280,361 | ) | $ | 2,397,432 | $ | (300,788 | ) | $ | 2,096,644 |
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
7. Derivative Financial Instruments (continued)
Nine months ended September 30, 2014 | Nine months ended September 30, 2013 | |||||||||||||||||||||||
Unleveraged | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Financial futures | $ | 466,151 | $ | 203,696 | $ | 669,847 | $ | (681,784 | ) | $ | (143,248 | ) | $ | (825,032 | ) | |||||||||
Commodity futures | (441,290 | ) | 1,128,744 | 687,454 | (316,619 | ) | 190,578 | (126,041 | ) | |||||||||||||||
Total | $ | 24,861 | $ | 1,332,440 | $ | 1,357,301 | $ | (998,403 | ) | $ | 47,330 | $ | (951,073 | ) |
Nine months ended September 30, 2014 | Nine months ended September 30, 2013 | |||||||||||||||||||||||
Leveraged | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Financial futures | $ | 159,589 | $ | (40,237 | ) | $ | 119,352 | $ | (599,596 | ) | $ | (101,145 | ) | $ | (700,741 | ) | ||||||||
Commodity futures | (108,386 | ) | 229,982 | 121,596 | (656,109 | ) | 301,079 | (355,030 | ) | |||||||||||||||
Total | $ | 51,203 | $ | 189,745 | $ | 240,948 | $ | (1,255,705 | ) | $ | 199,934 | $ | (1,055,771 | ) |
Nine months ended September 30, 2014 | Nine months ended September 30, 2013 | |||||||||||||||||||||||
Commodity L/N | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Commodity futures | $ | (2,885,410 | ) | $ | 588,437 | $ | (2,296,973 | ) | $ | (4,792,180 | ) | $ | 308,012 | $ | (4,484,168 | ) | ||||||||
Total | $ | (2,885,410 | ) | $ | 588,437 | $ | (2,296,973 | ) | $ | (4,792,180 | ) | $ | 308,012 | $ | (4,484,168 | ) |
Nine months ended September 30, 2014 | Nine months ended September 30, 2013 | |||||||||||||||||||||||
Commodity L/S | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Commodity futures | $ | (1,374,300 | ) | $ | 3,250,703 | $ | 1,876,403 | $ | (2,276,495 | ) | $ | 989,724 | $ | (1,286,771 | ) | |||||||||
Total | $ | (1,374,300 | ) | $ | 3,250,703 | $ | 1,876,403 | $ | (2,276,495 | ) | $ | 989,724 | $ | (1,286,771 | ) |
Nine months ended September 30, 2014 | Nine months ended September 30, 2013 | |||||||||||||||||||||||
Trust Total | Realized | Unrealized | Total | Realized | Unrealized | Total | ||||||||||||||||||
Financial futures | $ | 625,740 | $ | 163,459 | $ | 789,199 | $ | (1,281,380 | ) | $ | (244,393 | ) | $ | (1,525,773 | ) | |||||||||
Commodity futures | (4,809,386 | ) | 5,197,866 | 388,480 | (8,041,403 | ) | 1,789,393 | (6,252,010 | ) | |||||||||||||||
Total | $ | (4,183,646 | ) | $ | 5,361,325 | $ | 1,177,679 | $ | (9,322,783 | ) | $ | 1,545,000 | $ | (7,777,783 | ) |
The following tables reflect the trading activity for derivative financial instruments for the three months and six months ended September 30, 2014 and 2013:
Number of Contracts Opened | Number of Contracts Closed | Number of Contracts Opened | Number of Contracts Closed | |||||||||||||
Three months ended September 30, 2014 | Three months ended September 30, 2014 | Three months ended September 30, 2013 | Three months ended September 30, 2013 | |||||||||||||
Unleveraged | 738 | 660 | 517 | 513 | ||||||||||||
Leveraged | 146 | 134 | 278 | 311 | ||||||||||||
Commodity L/N | 482 | 1,299 | 414 | 628 | ||||||||||||
Commodity L/S | 943 | 681 | 695 | 648 | ||||||||||||
Trust Total | 2,309 | 2,774 | 1,904 | 2,100 |
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
7. Derivative Financial Instruments (continued)
Number of Contracts Opened | Number of Contracts Closed | Number of Contracts Opened | Number of Contracts Closed | |||||||||||||
Nine months ended September 30, 2014 | Nine months ended September 30, 2014 | Nine months ended September 30, 2013 | Nine months ended September 30, 2013 | |||||||||||||
Unleveraged | 2,039 | 1,795 | 2,025 | 1,943 | ||||||||||||
Leveraged | 513 | 524 | 1,760 | 2,107 | ||||||||||||
Commodity L/N | 4,297 | 4,789 | 2,669 | 3,093 | ||||||||||||
Commodity L/S | 3,439 | 3,229 | 3,798 | 3,884 | ||||||||||||
Trust Total | 10,288 | 10,337 | 10,252 | 11,027 |
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
8. Financial Highlights
The following represents the per share operating performance and ratios to the average investors’ interest and other supplemental information for the nine months ended September 30, 2014:
Unleveraged Series | Leveraged Series | Commodity L/N Unleveraged Series | Commodity L/S Unleveraged Series | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares | Class B Shares | Class C Shares | Class D Shares | Class E Shares | Class A Shares | Class B Shares | Class C Shares | Class D Shares | Class D Shares | Class E Shares | Class D Shares | |||||||||||||||||||||||||||||||||||||
Per share operating performance: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value per share at December 31, 2013/issuance | $ | 101.57 | $ | 117.90 | $ | 103.38 | $ | 107.71 | $ | 100.00 | (1) | $ | 73.83 | $ | 91.22 | $ | 74.84 | $ | 95.88 | $ | 91.26 | $ | 88.46 | $ | 85.08 | |||||||||||||||||||||||
Loss from investment operations: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (1.42 | ) | (0.78 | ) | (1.07 | ) | (0.71 | ) | (0.22 | ) | (1.76 | ) | (1.18 | ) | (1.38 | ) | (1.25 | ) | (0.60 | ) | (0.59 | ) | (0.55 | ) | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.37 | 1.61 | 1.75 | 1.84 | 2.83 | 3.61 | 4.51 | 4.17 | 5.39 | (1.78 | ) | (1.56 | ) | 3.15 | ||||||||||||||||||||||||||||||||||
Total from investment operations | (0.05 | ) | 0.83 | 0.68 | 1.13 | 2.61 | 1.85 | 3.33 | 2.79 | 4.14 | (2.38 | ) | (2.15 | ) | 2.60 | |||||||||||||||||||||||||||||||||
Net asset value per share at September 30, 2014 | $ | 101.52 | $ | 118.73 | $ | 104.06 | $ | 108.84 | $ | 102.61 | $ | 75.68 | $ | 94.55 | $ | 77.63 | $ | 100.02 | $ | 88.88 | $ | 86.31 | $ | 87.68 | ||||||||||||||||||||||||
Total Return: | (0.05 | )% | 0.70 | % | 0.66 | % | 1.05 | % | 2.61 | %(2) | 2.51 | % | 3.65 | % | 3.73 | % | 4.32 | % | (2.61 | )% | (2.43 | )% | 3.06 | % | ||||||||||||||||||||||||
Ratio to Average Investors’ Interest: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (1.60 | )% | (0.68 | )% | (1.04 | )% | (0.66 | )% | (0.22 | )%(2) | (2.91 | )% | (1.35 | )% | (1.86 | )% | (1.31 | )% | (0.66 | )% | (0.66 | )% | (0.63 | )% | ||||||||||||||||||||||||
Expenses | (1.63 | )% | (0.71 | )% | (1.07 | )% | (0.69 | )% | (0.22 | )%(2) | (2.89 | )% | (1.33 | )% | (1.85 | )% | (1.30 | )% | (0.70 | )% | (0.70 | )% | (0.66 | )% |
Total return is calculated as the change in the net asset value per share for the nine months ended September 30, 2014. The per share operating performance and ratios are computed based upon the weighted average shares outstanding and the weighted average of investors’ interest, respectively for each class, for the nine months ended September 30, 2014.
(1) | Net asset value at date of issuance. |
(2) | Total return, ratios of Net investment loss and Expenses to average investors interest calculated from date of issuance. |
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
8. Financial Highlights (continued)
The following represents the per share operating performance and ratios to the average investors’ interest and other supplemental information for the nine months ended September 30, 2013:
Unleveraged Series | Leveraged Series | Commodity L/N Unleveraged Series | Commodity L/S Unleveraged Series | |||||||||||||||||||||||||||||||||||||||||
Class A Shares | Class B Shares | Class C Shares | Class D Shares | Class A Shares | Class B Shares | Class C Shares | Class D Shares | Class D Shares | Class E Shares | Class D Shares | ||||||||||||||||||||||||||||||||||
Per share operating performance: | ||||||||||||||||||||||||||||||||||||||||||||
Net asset value per share at December 31, 2012 | $ | 105.41 | $ | 121.13 | $ | 106.27 | $ | 110.17 | $ | 79.88 | $ | 97.21 | $ | 79.67 | $ | 101.31 | $ | 96.92 | $ | 93.71 | $ | 88.53 | ||||||||||||||||||||||
Loss from investment operations: | ||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (1.46 | ) | (0.80 | ) | (1.09 | ) | (0.73 | ) | (1.84 | ) | (1.21 | ) | (1.42 | ) | (1.26 | ) | (0.61 | ) | (0.59 | ) | (0.56 | ) | ||||||||||||||||||||||
Net realized and unrealized loss on investment transactions | (2.98 | ) | (3.42 | ) | (2.66 | ) | (2.75 | ) | (6.17 | ) | (7.53 | ) | (5.69 | ) | (7.26 | ) | (3.91 | ) | (3.61 | ) | (2.26 | ) | ||||||||||||||||||||||
Total from investment operations | (4.44 | ) | (4.22 | ) | (3.75 | ) | (3.48 | ) | (8.01 | ) | (8.74 | ) | (7.11 | ) | (8.52 | ) | (4.52 | ) | (4.20 | ) | (2.82 | ) | ||||||||||||||||||||||
Net asset value per share at September 30, 2013 | $ | 100.97 | $ | 116.91 | $ | 102.52 | $ | 106.69 | $ | 71.87 | $ | 88.47 | $ | 72.56 | $ | 92.79 | $ | 92.40 | $ | 89.51 | $ | 85.71 | ||||||||||||||||||||||
Total Return: | (4.21 | )% | (3.48 | )% | (3.53 | )% | (3.16 | )% | (10.03 | )% | (8.99 | )% | (8.92 | )% | (8.41 | )% | (4.66 | )% | (4.48 | )% | (3.19 | )% | ||||||||||||||||||||||
Ratio to Average Investors’ Interest: | ||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (1.50 | )% | (0.77 | )% | (1.37 | )% | (0.66 | )% | (2.54 | )% | (1.45 | )% | (1.89 | )% | (1.48 | )% | (0.64 | )% | (0.63 | )% | (0.66 | )% | ||||||||||||||||||||||
Expenses | (1.54 | )% | (0.82 | )% | (1.44 | )% | (0.70 | )% | (2.56 | )% | (1.47 | )% | (1.90 | )% | (1.51 | )% | (0.69 | )% | (0.67 | )% | (0.71 | )% |
Total return is calculated as the change in the net asset value per share for the nine months ended September 30, 2013. The per share operating performance and ratios are computed based upon the weighted average shares outstanding and the weighted average of investors’ interest, respectively for each class, for the nine months ended September 30, 2013.
MLM Index ™ Fund
Notes to Unaudited Condensed Financial Statements (continued)
September 30, 2014
9. Subsequent Events
From October 1, 2014 through November 7, 2014, the Trust had no subscriptions for any Series.
The Trust had redemptions of approximately $139,000 for the Unleveraged Series and $18,000 for the Leveraged Series. There were no redemptions for the Commodity L/N Unleveraged Series or the Commodity L/S Unleveraged Series.
General
The purpose of the Trust is to replicate the results of the MLM Index™ or subset thereof, an index designed to measure the risk premium available to futures traders. Designed as such, the results of the Trust and each of its respective Series depend on two factors, the results of the MLM Index™ itself, and the Manager's ability to replicate that Index. It is important to note that the Manager also calculates the results of the MLM Index™. Thus, their role is twofold - to calculate the results of the MLM Index™, and to replicate the results of the MLM Index™ for the Trust. Any changes made to the composition of the MLM Index™ by the MLM Index™ Committee of the Manager will affect the trading of the Trust and each of the Series, since the objective is to replicate the MLM Index™ as published.
The Trust consists of several separate series of interests (each, a “Series”), each with its own assets and liabilities. Under the Trust Agreement, the Trust may issue multiple Series of Interests. The Trust maintains separate and distinct records for each Series and the assets associated with each such Series are held and accounted for separately from the other assets of the Trust and of any other Series thereof. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing, with respect to a particular Series, can only be enforced against the assets of such Series only and not against the assets of the Trust generally or the assets of any other Series.
Currently the Trust has four active series of interests: the Unleveraged Series, the Leveraged Series, the Commodity L/N Unleveraged Series (or “Commodity L/N Series”) and the Commodity L/S Unleveraged Series (or “Commodity L/S Series”). The Unleveraged Series attempts to replicate the MLM Index™ without any leverage, while the Leveraged Series trades the Trading Program at three times leverage. Leverage is the ability to control large dollar amounts of a commodity with a comparatively small amount of capital. The Leveraged Series purchases or sells $3 fair value of contracts for every $1 invested in the Series. The Commodity L/S Unleveraged Series and Commodity L/N Unleveraged Series attempt to replicate the MLM Commodity Long/Short Index and MLM Commodity Long/Neutral Index respectively, without leverage.
Results of the MLM Index™
The MLM Index™ is calculated from the prices of 22 liquid futures markets. These markets are traded on domestic and foreign exchanges. For each market, the MLM Index™ generally uses the price of 4 different delivery months each year. For example, in the Japanese Yen futures market, the MLM Index™ uses the March, June, September and December delivery months. On the day before trading day, the MLM Index™ determines whether to hold a long or short position in each constituent contract based on the calculation methodology of the MLM Index™. Once established, that position is held for the subsequent period, at which time it is re-evaluated. The monthly results of each constituent market are then used to calculate the MLM Index™ return. The objective of the Trust is to replicate this monthly return. The MLM Commodity L/S Index is a subset of the MLM Index and contains only the commodity futures markets of the entire MLM Index. The MLM Commodity L/N Index contains the same commodity futures contracts, but does not have short positions when the MLM Index algorithm indicates a short position in a particular contract.
The volatility of the constituent markets in the MLM Index™ can affect the results of a Series. The influences on this volatility are varied and unpredictable. However, since the object of each Series is to replicate the MLM Index™, the Manager takes no unusual action to mitigate this volatility. The role of the Manager is to buy or sell the appropriate number of futures contracts in each constituent market such that the aggregate return of those positions replicates as closely as possible the results of the MLM Index™ and its subsets.
In order to accomplish this objective, the Manager must calculate the number of contracts based on the assets in each Series. Since the MLM Index™ rebalances positions each month, at that time the Manager must ascertain the asset level and execute orders to achieve the desired allocations. This is achieved by adding the performance results of each Series for the month to the assets at the beginning of the month, and adding additions of capital from new subscriptions and subtracting redemptions in order to determine the asset level at the end of the period.
Summary of Critical Accounting Policies
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles. Management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Other than accruals maintained in the normal course of business, neither management nor the Trust prepares, maintains or updates any estimates. Management believes that the estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Trust's significant accounting policies are described in detail in Note 2 of the Notes to Financial Statements.
The Trust records all investments at fair value in its financial statements, with changes in fair value reported as a component of realized and unrealized gain (loss) on investments in the Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, significant judgments and estimates are involved in determining fair value in the absence of an active market closing price.
Financial Condition
To replicate the results of the MLM Index™, each Series must execute trades on domestic or foreign futures exchanges. The Manager deposits a percentage of the assets of each Series into separate accounts at Citigroup Global Markets. The amount deposited is determined by the margin requirement established by the exchanges to hold the positions in each Series.
Each Series' assets are held in separate custodial accounts at State Street Bank and Trust (the “Bank"). The Trust has contracted with Aberdeen Asset Management (“Aberdeen”) to manage the money in these accounts so as to maximize the interest income which accrues to each Series, while maintaining strict credit controls as determined by the CE Act. When Citigroup Global Markets requires additional assets to maintain the positions for a Series, the Bank makes a wire transfer to Citigroup Global Markets. If Citigroup Global Markets has surplus assets in a Series account, Citigroup Global Markets makes a wire transfer to the account at the Bank.
The Trust owns no capital assets and does not borrow money. Since the objective of the Trust is to replicate the results of the MLM Index™, its entire asset base participates in the speculative trading of futures contracts. As such, all the assets of each Series are at risk. The level of assets will be determined by the results of each Series, and the effect of addition of capital and the redemption of Series interests. These variables are impossible to predict with any certainty.
Liquidity
The majority of each Series' assets are held in liquid short-term interest rate instruments. Each Series takes substantial exposure in futures markets, which requires relatively small deposits, called margin, to hold the positions. As of September 30, 2014, increases (decreases) in cash and cash equivalents amounted to approximately $14.7m, ($0.3m), $2.8m and $4.9m for the Unleveraged Series, Leveraged Series, Commodity L/N Series and the Commodity L/S Series of the Trust, respectively. As at September 30, 2014, increases (decreases) in due from broker amounted to approximately $0, $2.0m, $2.9m and $1.4m for the Unleveraged Series, Leveraged Series, Commodity L/N Series and the Commodity L/S Series of the Trust, respectively. Net cash provided by (used in) operations amounted to approximately $(0.4m), $2.0m, $(1.1m) and $(0.3m) for the Unleveraged Series, Leveraged Series, Commodity L/N Series and the Commodity L/S Series of the Trust, respectively. For the period ended September 30, 2014 the Unleveraged Series, Leveraged Series, Commodity L/N Series and the Commodity L/S Series generated net income (loss) from operations of approximately $0.9m, $0.1m, $(3.5m) and $1.5m, respectively. In general, each unleveraged Series will have about 5% of its assets on deposit with brokers as margin and each leveraged Series will have about 15% of its assets on deposit with brokers as margin, with the balance held in custodial accounts with a major financial institution.
A holder of interests in a Series may liquidate that holding at the end of any month at the net asset value of the interests, upon 10 days written notice to the Manager. While the Manager generally must honor all requests for redemption if presented in proper form, the Manager may suspend temporarily any redemption if the effect of such redemption, either alone or in conjunction with other redemptions, would impair the relevant Series' ability to operate if the impairment would be caused by a third party other than the Manager. Further, the right to obtain a redemption is contingent upon the relevant Series having property sufficient to discharge its liabilities on the date of redemption. Under certain circumstances, the Manager may find it advisable to establish a reserve for contingent liabilities. In such event, the amount receivable by a redeeming holder of interests will be reduced by his proportionate share of the reserve. There is no secondary market for interests in the Trust, and none is anticipated. There are restrictions for transfer of interests.
Although each Series trades in futures contracts which are in general liquid, the exchanges impose daily trading limits, which act to suspend trading when a particular market or contract trades up or down to a pre-determined price level. Should this happen, and a Series was attempting to execute trades in that situation, the Series may not be able to accurately replicate the results of the MLM Index™. These rules have not had a material impact on the operation of any Series to date. Each Series generally trades only in the largest and most liquid futures contracts, and generally has available approximately 85%-95% of its assets in the form of highly liquid money market securities. The Trust believes that, except in extreme market conditions, all open positions can be liquidated in an efficient, orderly fashion.
Off-Balance Sheet Arrangements
The Trust has no off-balance sheet arrangements that it believes does or will be reasonably likely to have a material current or future effect on any Series' results of operations, financial condition, liquidity, capital expenditures or capital resources.
Market and Credit Risks
The nature of the Trust is such that it undertakes substantial market risk in following its mandate to replicate the MLM Index™ and its subsets. Although the Manager monitors the intraday and daily valuation of each portfolio, no extraordinary measures are taken to reduce market risk. Specifically, the Manager maintains positions required to match, as closely as possible, the return of the MLM Index™ and its subsets. There could be certain circumstances where the Manager might be called upon to make a change to this policy, such as the closing of an exchange or some other emergency situation. In such case, management would use its best efforts to respond to such circumstances with the interests of the investors in mind.
The MLM Index™ and its subsets are not designed to predict which market will exhibit positive performance in any given year. The Manager does not select the constituent markets based on expectations of future performance. The MLM Index™ and its subsets are designed to represent participation in a diverse basket of futures contracts using a trend-following algorithm. The MLM Index™ and its subsets are a diversified Index producing different levels of return in the various sectors from year to year.
Each Series incurs various kinds of credit risk in its operations. In order to facilitate the trading of a Series, assets must be placed with Futures Commission Merchants. Management of the Trust deals only with established registered firms, and monitors their financial condition on an ongoing basis. In addition, if a Series were to enter into over-the-counter transactions (“OTC transactions”), additional counterparty risk would be incurred. There were no OTC transactions during the nine months ended September 30, 2014 in any Series.
Results of Operations
At September 30, 2014 and December 31, 2013, the Series of the Trust had assets as follows:
Trust Series | September 30, 2014 | December 31, 2013 | ||||||
Unleveraged Series | $ | 59,601,705 | $ | 43,592,730 | ||||
Leveraged Series | $ | 4,122,993 | $ | 6,297,468 | ||||
Commodity L/N Unleveraged Series | $ | 130,072,305 | $ | 129,589,830 | ||||
Commodity L/S Unleveraged Series | $ | 44,347,817 | $ | 37,606,767 | ||||
Total | $ | 238,144,820 | $ | 217,086,795 |
At September 30, 2014 and December 31, 2013, the Series of the Trust had liabilities as follows:
Trust Series | September 30, 2014 | December 31, 2013 | ||||||
Unleveraged Series | $ | 661,615 | $ | 4,770,918 | ||||
Leveraged Series | $ | 48,743 | $ | 1,834,228 | ||||
Commodity L/N Unleveraged Series | $ | 360,175 | $ | 110,733 | ||||
Commodity L/S Unleveraged Series | $ | 36,402 | $ | 34,691 | ||||
Total | $ | 1,106,935 | $ | 6,750,570 |
Net income (loss) from operations for the Series of the Trust for the nine months ended September 30, 2014 and September 30, 2013 was as follows:
Trust Series | September 30, 2014 | September 30, 2013 | ||||||
Unleveraged Series | $ | 920,142 | $ | (1,401,146 | ) | |||
Leveraged Series | $ | 147,066 | $ | (1,353,502 | ) | |||
Commodity L/N Unleveraged Series | $ | (3,466,967 | ) | $ | (5,559,974 | ) | ||
Commodity L/S Unleveraged Series | $ | 1,514,339 | $ | (1,687,321 | ) | |||
Total | $ | (885,420 | ) | $ | (10,001,943 | ) |
The Trust’s net income (loss) is directly related to the performance of the MLM Index™, which the Trust is designed to replicate. For the nine months ended September 30, 2014, MLM Index™ performance and its subsets were 2.14%, (1.66%) and 4.21% for the MLM Index, MLM Commodity Index L/N and the MLM Commodity Index L/S respectively. Performance was (2.16%), (3.69%) and (1.83%) respectively for the same period ended September 30, 2013. A Series' performance may be negative in years when the MLM Index™ is positive or have greater losses when the MLM Index™ is negative due to the timing of subscriptions and redemptions, and the fees charged. Since inception of the Trust, the correlation of monthly results between each Series and the MLM Index™ and its subsets adjusted for fees is 0.99.
The following table represents the performance by class for the MLM Index™ Fund for the nine months ended September 30, 2014 and 2013.
September 30, 2014
Unleveraged Series | Leveraged Series | Unleveraged Commodity L/N Series | Unleveraged Commodity L/S Series | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares | Class B Shares | Class C Shares | Class D Shares | Class E Shares | Class A Shares | Class B Shares | Class C Shares | Class D Shares | Class D Shares | Class E Shares | Class D Shares | |||||||||||||||||||||||||||||||||||||
Total Return: | (0.05 | )% | 0.70 | % | 0.66 | % | 1.05 | % | 2.61 | % | 2.51 | % | 3.65 | % | 3.73 | % | 4.32 | % | (2.61 | )% | (2.43 | )% | 3.06 | % |
September 30, 2013
Unleveraged Series | Leveraged Series | Unleveraged Commodity L/N Series | Unleveraged Commodity L/S Series | |||||||||||||||||||||||||||||||||||||||||
Class A Shares | Class B Shares | Class C Shares | Class D Shares | Class A Shares | Class B Shares | Class C Shares | Class D Shares | Class D Shares | Class E Shares | Class D Shares | ||||||||||||||||||||||||||||||||||
Total Return: | (4.21 | )% | (3.48 | )% | (3.53 | )% | (3.16 | )% | (10.03 | )% | (8.99 | )% | (8.92 | )% | (8.41 | )% | (4.66 | )% | (4.48 | )% | (3.19 | )% |
The components of the return of the MLM Index™ are the capital gains earned from the changes in futures market prices, and the interest income earned on cash balances. The mechanics and rules of futures markets allow the Trust to earn interest on approximately 100% of the assets in the Trust. The interest income takes two forms, directly from the Trust's futures broker paid on the margin deposits held by the broker, and excess cash.
The following is a discussion of the quantification of market risk for the Trust. Such calculations are often referred to as Value-at-Risk (“VAR”). The method used here may or may not differ from other methods used for VAR calculations by other firms. There is no one generally accepted method of VAR calculation and this method may not be comparable to methods used by others.
The market risk, or VAR of the Trust, is directly related to the composition of the MLM Index™. Each month, the position of the MLM Index™ can be either long or short based on a 252 business day moving average rule. Since positions can be offset inside of sectors (one contract long in a particular commodity and one contract short in a related commodity), specific sector risk is less relevant than the historical risk of the MLM Index™ as a whole. Since the objective of the Trust is to replicate the MLM Index™, it is reasonable to use the historic values of that Index to estimate market risk.
The VAR of each Series is calculated as follows:
1. | The manager calculates the standard deviation of the historical returns of the MLM Index™ and its subsets on an asset-weighted basis over two time periods, using daily returns over the preceding 1 year ending at the date of this report, and using monthly returns over the preceding 10 years. It is important to note that this calculation is made on the historical data of the MLM Index™ and its subsets. It is not based on the actual trading of the Trust and does not include any operational risk. The standard deviation is used to measure the dispersion of the returns of the MLM Index™ and its subsets. |
2. | For the purposes of VAR, one attempts to estimate the size of a loss that may occur with some small probability. It does not estimate the possibility of some total loss, only the probability of a loss of some magnitude. The calculation is complicated by the fact that the standard deviation of the distribution assumes a normal distribution, which may or may not be a good estimate of the actual distribution. For the purposes of this estimate, the Manager has chosen to calculate the size of a daily and monthly loss that might occur with a probability of 1% (1 chance in 100). To do this, the standard deviation is multiplied by 2.35 to the standard 99% confidence interval, and by 1.5 to adjust for the possibility of a non-normal distribution. For daily returns, this estimate is a loss of 0.95%. For monthly returns the estimate is a loss of 9.53%. |
3. | To ascertain a dollar loss amount for each Series, the assets of the Series as of September 30, 2014 are multiplied by the estimate of the risk calculated in step 2 above. The risk estimate is based on the unleveraged and leveraged series of the Trust, with the leveraged assets having three times the risk of the unleveraged assets. Based on the asset levels as of September 30, 2014, the manager estimates that the amount each Series of the Trust could expect to lose as follows in any given day and in any given month. |
Trust Series | Any Given Day | Any Given Month |
Unleveraged Series | $0.3 million | $3.1 million |
Leveraged Series | $0.1 million | $0.7 million |
Commodity L/N Unleveraged Series | $1.4 million | $13.7 million |
Commodity L/S Unleveraged Series | $0.6 million | $6.1 million |
The estimate above, though reasonable, should not be taken as an assurance that losses in a Series could not be greater than these amounts. This is simply a quantitative estimate based on the historical performance of the MLM Index™ and its subsets. The loss that occurs with small probability may be substantially greater than the loss indicated above. Also, market conditions could change dramatically from the conditions that prevailed over the period used to calculate the estimate, affecting the realized volatility of the market. Furthermore, other factors could affect trading, such as the inability to execute orders in a particular market, due to operational or regulatory restrictions that may alter the pattern of a Series' returns. Specifically, the Manager advises other funds in addition to the Trust. In certain markets there is a limit to the size a position that one entity can control (speculative limits). Since positions cannot exceed speculative limits, the Manager may have to allocate positions across accounts and funds, resulting in a less than complete replication of the MLM Index™ and its subsets. It is best to remember the fact that, as outlined in the offering for the Trust, that all the assets invested are at risk of loss.
Since the calculation of the VAR does not look at the specific instrument risks, but rather the results of the MLM Index™ and its subsets as a whole, risks related to actual execution are not included in the calculation. For example, counter-party risks from OTC transactions are not factored into the calculation.
Additional market risk may be attributed to the actual execution of the orders for a Series. Each Series executes the majority of its orders on the last day of each month. As assets of a Series grow, large orders may be placed in periods of reduced liquidity. Such orders may move the markets in which they are executed, adversely affecting the performance of the Trust. The Manager makes every effort to execute all orders efficiently, but general levels of liquidity are beyond the control of management. In certain circumstances, markets may move to the daily trading limits imposed by the exchanges, and a Series may be unable to execute the necessary orders to replicate the MLM Index™ and its subsets, causing extensive slippage.
Non-Market Risk
Risk from Brokers - Each Series' futures commission merchant, Citigroup Global Markets, holds some portion of the assets of the Series as margin deposits for futures trading. A failure of Citigroup Global Markets could cause the portion of the Series’ assets held there to be at risk or unavailable for an undetermined period of time.
Speculative Limits - Certain futures exchanges require that positions deemed speculative in nature (as opposed to commercial hedge positions) cannot exceed certain pre-defined levels. All positions in the control of the Manager must be aggregated to determine compliance with these rules. Should the assets of the Manager reach a level such that positions may be capped, accurate replication of the MLM Index™ for the Trust may be difficult or impossible. The Manager may also use certain OTC derivatives to achieve the same exposure without exceeding speculative limits. These OTC products would involve taking additional counter-party risk for a Series in order to achieve accurate replication of the MLM Index™. For example, if it was determined that a Series must hold 10 contracts of Soybeans for a specific delivery, the Series could execute the appropriate futures contracts on the appropriate futures exchange. Or, the Manager of each Series may choose to enter into a swap agreement, which would have substantially the same economic effect of the futures position, but would be executed in the over-the-counter market. The swap contract would change the nature of the counter-party from an organized exchange to a single dealer, and would materially increase the non-market risk of holding the position. No Series has yet utilized OTC swap contracts.
As of the end of the period covered by this Quarterly Report, the Manager’s President and the Chief Financial Officer (collectively the “Certifying Officers”), as well as the other key members of our management, maintain a system of disclosure controls and procedures with respect to each Series individually, as well as the Trust as a whole, that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management in a timely manner.
(a) Evaluation of disclosure controls and procedures. As of the end of the period covered by this Quarterly Report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures with respect to each Series individually, as well as the Trust as a whole, and have concluded that our disclosure controls and procedures with respect to each Series individually, as well as the Trust as a whole, are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosures. Based on such evaluation we have concluded these disclosure controls are effective as of September 30, 2014.
(b) Changes in internal control over financial reporting. There has been no change in management’s internal control over financial reporting that occurred in the second fiscal quarter that has materially affected, or is reasonably likely to materially affect, management’s internal control over financial reporting with respect to each Series individually, as well as the Trust as a whole.
The Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer, Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer, Section 1350 Certification of Principal Executive Officer and Section 1350 Certification of Principal Financial Officer, included as Exhibit 31.1, Exhibit 31.2, Exhibit 32.1 and Exhibit 32.2 hereto, respectively, are applicable with respect to each Series individually, as well as to the Trust as a whole.
Part II. OTHER INFORMATION
The Manager is not aware of any proceedings threatened or pending against the Trust and its affiliates which, if determined adversely, would have a material adverse effect on the financial condition or results of operations of the Trust.
None.
Unleveraged Series | Leveraged Series | Unleveraged Commodity L/N Series | Unleveraged Commodity L/S Series | |||||||||||||||||||||||||||||||||||||||||||||
Class A | Class B | Class C | Class D | Class E | Class A | Class B | Class C | Class D | Class D | Class E | Class D | |||||||||||||||||||||||||||||||||||||
Jul-14 Subscriptions | $ | - | $ | - | $ | - | $ | 2,400,000 | $ | 19,599,401 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 100,000 | ||||||||||||||||||||||||
Subscriptions Units | - | - | - | 22,612 | 195,994 | - | - | - | - | - | - | 1,199 | ||||||||||||||||||||||||||||||||||||
# of Purchasers | - | - | - | 1 | 1 | - | - | - | - | - | - | 1 | ||||||||||||||||||||||||||||||||||||
Unit Price | $ | 99.36 | $ | 115.91 | $ | 101.61 | $ | 106.14 | $ | 100.0 | $ | 70.57 | $ | 87.85 | $ | 72.11 | $ | 92.73 | $ | 93.05 | $ | 90.30 | $ | 83.39 | ||||||||||||||||||||||||
Aug-14 Subscriptions | $ | - | $ | - | $ | - | $ | 275,000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||||
Subscriptions Units | - | - | - | 2,595 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
# of Purchasers | - | - | - | 1 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Unit Price | $ | 99.09 | $ | 115.69 | $ | 101.41 | $ | 105.98 | $ | 99.87 | $ | 70.18 | $ | 87.47 | $ | 71.81 | $ | 92.40 | $ | 90.05 | $ | 87.41 | $ | 83.05 | ||||||||||||||||||||||||
Sep-14 Subscriptions | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 5,125,000 | ||||||||||||||||||||||||
Subscriptions Units | - | - | - | - | - | - | - | - | - | - | - | 62,541 | ||||||||||||||||||||||||||||||||||||
# of Purchasers | - | - | - | - | - | - | - | - | - | - | - | 2 | ||||||||||||||||||||||||||||||||||||
Unit Price | $ | 99.47 | $ | 116.23 | $ | 101.88 | $ | 106.51 | $ | 100.39 | $ | 71.22 | $ | 88.87 | $ | 72.96 | $ | 93.94 | $ | 88.79 | $ | 86.21 | $ | 81.95 |
None.
None.
None.
(a) Exhibits | ||
Certification of President of the Manager Pursuant to Rule 13A-14(a) and Rule 15D-14(a), of the Securities Exchange Act, as amended. | ||
Certification of Chief Operating Officer of the Manager Pursuant to Rule 13A-14(a) and Rule 15D-14(a), of the Securities Exchange Act, as amended. | ||
Certification of President of the Manager Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
Certification of Chief Operating Officer of the Manager Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension label Linkbase | |
101.PRE | XBRL Extension Presentation Linkbase |
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.
MLM INDEX™ FUND | ||
By: Mount Lucas Management LP | ||
Its: Manager | ||
By: /s/ Timothy J. Rudderow, Sr | ||
Timothy J. Rudderow, Sr | ||
President |
Date: November 7, 2014
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