Item 1. Business
The Registrant (the “Fund”) was granted an initial effective date by the Securities and Exchange Commission ("SEC") on November 3, 2005. The Fund's Registration Statement filed May 7, 2010 for $20,000,000 in face amount of units of limited partnership interests (the "Units") went effective with the SEC on August 10, 2010. On July 7, 2011, the Fund had sold approximately $1,374,000 in Units and commenced business.
The Managing Member, in its sole discretion, selects CTAs and their allocation of equity, from time to time. The trades for the Fund are selected and placed with the futures commission merchant (“FCM”), i.e., clearing broker, for the account of the Fund by one or more CTAs selected, from time to time, by the Managing Member of the Fund. The books and records of the trades placed by the CTAs in the Fund’s trading accounts are kept and available for inspection by the Members at the office of the corporate Managing Member, 5914 N. 300 West, Fremont, IN 46737. The Fund Operating Agreement is included as Appendix A to the Prospectus delivered to the prospective investors and filed as part of the Registration Statement. The Operating Agreement defines the terms of operation of the Fund and is incorporated herein by reference. See Subsequent Events at the end of this section.
None of the purchasers of Units of Membership Interest has a voice in the management of the Fund. Reports of the Net Asset Value of the Fund are sent to all Members at the end of each month.
The sale of Units is regulated by Securities Act of 1933 and the Commodity Exchange Act. Once the Units are issued, the operation of the Fund is subject to regulation pursuant to the Securities and Exchange Act of 1934 and the Commodity Exchange Act. The U.S. Securities and Exchange Commission and the Securities Commissions and securities acts of the several States where its Units are offered and sold have jurisdiction over the operation of the Fund. The National Futures Association has jurisdiction over the operation of the Managing Member and the Commodity Trading Advisors. This regulatory structure is not intended, nor does it, protect investors from the risks inherent in the trading of futures and options.
During the periods covered by this report, the CTA selected to trade on behalf of the Fund was GT Capital CTA (see Subsequent Events, below), which was paid a 1% management fee on Fund assets allocated to it to trade, along with a 20% incentive fee on New Net Profit, as that term is defined in the Fund’s prospectus. The Managing Member allocated approximately 50% of trading assets to each of two programs traded by the CTA. For purposes of calculating the incentive fee, the performance of both programs are netted during each quarterly incentive fee period such that the trading advisor is only paid an incentive fee when the performance considering both programs is net positive.
Upon the commencement of business, the Fund began to reimburse the managing member and its affiliates for offering and organizational of $291,153, though payment will not exceed 15% of gross subscription proceeds at any time. Such expenses are amortized by the Fund over 60 months on a straight line basis, or paid off sooner at the managing member’s discretion.
Through August 31, 2011, the Fund paid the corporate managing member a 2.5% annual management fee calculated on the prior month-end net assets, and pay brokerage commissions to the affiliated introducing broker of $15 per round turn. Beginning September 1, 2011, the aforementioned fees were no longer paid. Instead, the Fund pays fixed annual brokerage commissions of 10%, calculated on the prior month-end net assets, with 2.5% to the corporate managing member and 7.5% to the introducing broker, paid monthly. In its July 6, 2011 prospectus, the managing member had estimated the round turn brokerage of $15 would approximate 7.5% annually of Fund net assets. Accordingly, the managing member does not believe the total fees charged to the Fund changed. There is a twelve month lock-in commencing from the date an investment is admitted to the Fund. See Subsequent Events, below.
Subsequent Events: On January 2, 2013, the Managing Member provided notice to Members of the following operational changes to the Fund as of that date. The Fund's Advisory Agreement with GT Capital CTA was terminated and GT no longer serves as a Commodity Trading Advisor ("CTA") to the Fund. Stenger Capital Management, LLC ("Stenger"), an independent registered CTA, now serves as the Fund's sole trading advisor, and the Managing Member has directed it to trade its Diversified Trading Program on behalf of the Fund. Stenger is paid a 0.8% management fee calculated on the month-end net assets allocated to it by the Fund to trade, along with a 16% monthly incentive fee on New Net Profits, as that term is defined in the Fund's disclosure document. The Managing Member reserves the right (i) to allow the CTA to trade notionally up to three times (3x) leverage and (ii) to reduce the CTA's leverage to as little as half (0.5x). The CTA's management fee will fluctuate with the leverage amount from a minimum of 0.4% (for 0.5x leverage) to up to 2.4% (for 3x leverage). The decision by the Managing Member to allow notional trading was based, in part, upon the CTA's low historical drawdown over its thirty month trading history. However, past performance is not necessarily indicative of future results. ADM Investor Services, Inc. will be engaged as a futures commission merchant (FCM), in addition to Vision Financial Markets LLC, which will be retained. The Fund no longer pays the 10% annual fixed brokerage commissions. Instead, the Fund will pay brokerage commissions of $11 per round turn for domestic trades plus actual commissions for foreign trades, if any. From this, all brokerage, exchange, account and NFA fees will be paid to the FCMs, with the balance to the introducing broker. The Managing Member estimates that the new per round turn fee arrangement will equal up to 6% annually of Fund net assets if the maximum of three times leverage were employed with the CTA. The Fund will pay a 5% annual management fee to the Managing Member, paid monthly, calculated on month-end Fund net assets.
Item 1A.
Item 1A. Risk Factors
The trading of futures, options on futures and other commodities related investments is highly speculative and risky. You should make an investment in the Fund only after consulting with independent, qualified sources of investment and tax advice and only if your financial condition will permit you to bear the risk of a total loss of your investment. You should consider an investment in the Units only as a long-term investment. Moreover, to evaluate the risks of this investment properly, you must familiarize yourself with the relevant terms and concepts relating to commodities trading and the regulation of commodities trading, which are discussed in the Risk Factors section of the Prospectus, which is incorporated herein by reference.
You should carefully consider all the information we have included or incorporated by reference in this Report and our subsequent periodic filings with the SEC. In particular, you should carefully consider the risk factors described above and read the risks and uncertainties as set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” Section of this Report. Any of the heretofore mentioned risks and uncertainties could materially adversely affect the Fund, its trading activities, operating results, financial condition and Net Asset Value and therefore could negatively impact the value of your investment. You should not invest in the Units unless you can afford to lose all of your investment.
Item 1B.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Item 2. Properties
Any FCM selected by the Managing Member must be registered with the National Futures Association pursuant to the Federal Commodity Exchange Act as a commodity FCM. The trading of futures, options on futures and other commodities is highly speculative and the Fund has an unlimited risk of loss, including the pledge of all of its assets, to the trades made on its behalf by the CTAs in the commodity markets. As of the period end covered by this report, the Fund maintained approximately: 75% of its assets at the futures commission merchant (FCM) to be available for trading by the trading advisor, 9% in a cash management fund that invests only in U.S. Treasurys and has high liquidity, and 16% in the Fund’s bank accounts to pay expenses and redemptions. All such accounts are held in the name of the partnership and not commingled with those of any other entity. The Fund also reserves the right to invest in T-Bills held with the US Department of Treasury. The Fund expects to maintain a substantial portion of our net assets in segregation with the FCM for trading by the trading advisor.
Item 3.
Item 3. Legal Proceedings
There have been no reportable legal proceedings against the Fund, its Managing Member, the CTA, the IB or any of their Affiliates, directors or officers.
The FCMs have had the following described reportable events, none of which, in their respective opinions, is material to their performance on behalf of the Fund’s accounts:
Vision Financial Markets LLC. On May 18, 2011, simultaneously with the issuance of a complaint by the NFA, Vision Financial Markets LLC ("Vision") consented to a finding based on a one-count complaint for failure to supervise guaranteed IBs in violation of NFA Compliance Rule 2-9(a). The alleged activities occurred prior to 2009. Without admitting or denying the findings in the Committee’s Decision, Vision consented to pay a fine of $500,000 and to retain an independent consultant to review its supervisory procedures relating to guaranteed IBs. Vision undertook to implement revised procedures for supervising GIBs within 6 months.
ADM Investor Services, Inc. There have been no administrative or criminal actions, whether pending or concluded, against ADM or any of its individual principals during the past five years which would be considered "material" as that term is defined in Section 4.24(l)(2) of the Regulations of the Commodity Futures Trading Commission, except the CFTC Order entered on March 26, 2009. In this order, the CFTC finds that during 2002 to 2004, ADM lacked adequate procedures concerning post execution allocation of bunched orders and that it allowed an account manager to carry out post-execution allocations from one or more days after the day the trades were executed and that it failed to maintain certain records to identify orders subject to post execution allocation. The order imposes a remedial sanction of $200,000 and requires ADM to implement enhanced procedures for post execution allocation of trades.
The FCMs act only as clearing brokers for the Fund’s futures accounts and are paid commissions for executing and clearing trades. The FCMs have not passed upon the adequacy or accuracy of the Fund’s prospectus or this report and will not act in any supervisory capacity with respect to the CPO or the CTA, as the case may be, nor participate in the management of the CPO or of the Fund or of the CTA. Therefore, investors should not rely on the FCMs in deciding whether or not to participate in the Fund.
The Fund is not aware of any threatened or potential claims or legal proceedings to which the Fund is a party or to which any of its assets are subject. The FCMs have represented to the Managing Member that that none of the events reported above would interfere with its performance as a clearing brokers for the Fund’s accounts.
Item 4.
Item 4. Mine Safety Disclosures.
N/A
PART II
Item 5.
Item 5. Market for Registrant's Units of Membership Interest, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Fund desires to be taxed as a partnership and not as a corporation. In furtherance of this objective, the Operating Agreement requires a security holder to obtain the approval of the Managing Member prior to the transfer of any Units. Accordingly, there is no trading market for the Fund Units and none is likely to develop. The Members must rely upon the right of Redemption provided in the Operating Agreement to liquidate their interest.
The Fund has fewer than 300 holders of its securities. Members are required to represent to the issuer that they are able to understand and accept the risks of investment in a commodity pool for which no market will develop and the right of redemption will be the sole expected method of withdrawal of equity from the Fund. The Managing Member has sole discretion in determining what distributions, if any, the Fund will make to its Members. The Fund has not made any distributions as of the date hereof. The Fund has no securities authorized for issuance under equity compensation plans. See the Operating Agreement attached as Appendix A to the Registration Statement, incorporated herein by reference, for a complete explanation of the right of redemption provided to Members.
Item 6.
Item 6. Selected Financial Data
The Fund is not required to pay dividends or otherwise make distributions and none are expected. The Members must rely upon their right of redemption to obtain their return of equity after consideration of profits, if any, and losses from the Fund. See the Registration Statement, incorporated herein by reference, for a complete explanation of the allocation of profits and losses to a Member’s capital account.
Following is a summary of certain financial information for the Registrant for the previous five years through December 31, 2012, presented with the caveat that the Registrant only commenced its business of trading futures in the third quarter of 2011.
The following summarized quarterly financial information presents the results of operations for the quarterly periods during the years ended December 31, 2012 and 2011.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Critical Accounting Policies and Estimates
The Fund records all investments at market value in its financial statements, with changes in market value reported as a component of realized and change in unrealized trading gain (loss) in the Statements of Operations. In certain circumstances, estimates are involved in determining market value in the absence of an active market closing price.
Capital Resources
The Fund will raise additional capital only through the sale of Units offered pursuant to the continuing offering, and does not intend to raise any capital through resale of Units once issued or borrowing. Due to the nature of the Fund’s business, it will make no capital expenditures and will have no capital assets which are not operating capital or assets.
Liquidity
Most United States commodity exchanges limit fluctuations in commodity futures contracts prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits”. During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Commodity futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Fund from promptly liquidating unfavorable positions and subject the Fund to substantial losses which could exceed the margin initially committed to such trades. In addition, even if commodity futures prices have not moved the daily limit, the Fund may not be able to execute futures trades at favorable prices, if little trading in such contracts is taking place. Other than these limitations on liquidity, which are inherent in the Fund’s commodity futures trading operations, the Fund’s assets are expected to be highly liquid.
See Item 2 of this Report for a description of where Fund assets will be held. Investors should note that maintenance of the Fund’s assets in U.S. government securities and banks does not reduce the risk of loss from trading futures and options on futures contracts. The Fund receives all interest earned on its assets. No other person shall receive any interest or other economic benefits from the deposit of Fund assets.
Approximately 10% to 40% of the Fund’s assets normally are committed as required margin for futures contracts and held by the futures broker, although the amount committed may vary significantly. Such assets are maintained in
the form of cash or U.S. Treasury bills in segregated accounts with the futures broker pursuant to the Commodity Exchange Act and regulations thereunder.
The Fund’s assets are not and will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested with or loaned to the Fund, the Managing Member or any affiliated entities.
Results of Operations
The initial start-up costs attendant to the sale of Units by use of a Prospectus which has been filed with the Securities and Exchange Commission are substantial. The Operating Agreement grants solely to the Managing Member the right to select the CTAs and to otherwise manage the operation of the Fund. See the Registration Statement, incorporated by reference herein, for an explanation of the operation of the Fund.
On July 7, 2011, the Fund commenced business after admission of 26 limited partners, with total subscriptions of $1,374,333. As of December 31, 2012, aggregate subscriptions were $2,761,531. Because the Fund was not operational prior to July 7, 2011, the Fund believes it would be misleading to compare the year ended 2012 to the full years ended 2011 and 2010. Also, see Subsequent Events in Part I, Item 1 of this report.
For non-financial reporting purposes (subscription and redemption purposes), the Fund's initial net asset value (NAV) per Unit of $1,000 decreased to $922.14, a loss of (7.79)%, from the commencement of operations into year end December 31, 2011 (the “Partial Year 2011”); and, during the year 2012, it decreased to $687.92, a loss of (25.40)%. During both periods, the losses were primarily as a result of operational expenses, which were $(121,966) in the Partial Year 2011 and $(250,964) in 2012. During the Partial Year 2011, the Fund's net assets increased to $1,796,875, primarily as a result of capital contributions by Members of $2,155,371, offset partially by redemptions of $(239,611). During 2012, the Fund’s net assets decreased to $585,664, primarily as a result of redemptions of $(1,225,860), offset partially by capital contributions of $601,159.
Going forward, any positive revenue is expected to be primarily derived from the trading of the trading advisor until short term interest rates rise and contribute non-negligibly. The trading advisor’s objective is to achieve appreciation of the Fund's assets through speculative trading in futures contracts and options on futures contracts. There is no representation being made that the trading programs offered by the trading advisor will be successful in achieving this goal.
Money managers generally rely on either fundamental or technical analysis, or a combination thereof, in making trading decisions and attempting to identify price trends in a commodity interest. "Fundamental analysis" is the consideration of factors external to the market of a particular instrument. For example, weather and political events which affect the supply and demand of that particular instrument, in order to predict future prices of that instrument. As an example, some of the fundamental factors that affect the supply of commodities (e.g., agricultural products such as corn and soybeans) include the acreage planted, weather during the growing season, harvesting and distribution of the commodity and the previous year's crop carryover. The demand for such commodities is determined in part by domestic consumption and exports and is a product of many factors, including general world economic conditions, exports and the cost of competing products which might be substituted as alternate sources of food or fiber.
Technical analysis is not based on the anticipated supply and demand of the "cash" or "physical" (i.e., actual) commodity; instead, technical analysis is based on the theory that a study of the markets themselves (in particular, of trends of prices established by the markets for various instruments during selected historical periods) provides a means of anticipating prices. Technical analysis of the markets often includes a study of the actual daily, weekly and monthly price fluctuations, as well as volume variations and changes in open interest, utilizing charts and/or computers for analysis of these items and other technical market data. Both general methodologies have been employed with success by traders and investors in the past, however, neither trading method can be assured of success in a particular interval of time.
If a large price movement occurs in a sector that a trading advisor trades, such as stock indices, agriculture, financials, metals or softs, it does not necessarily mean that the trading advisor will engage in trades that capture
such moves. Accordingly, market movements and conditions are not necessarily correlated with Fund performance. As always, past performance is not necessarily indicative of future results.
Interest income was negligible during the reporting period because of low short term interest rates.
These results are not to be construed as an expectation of similar profits or losses in the future.
Off-Balance Sheet Risk
The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Fund trades in futures and options on futures contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Fund, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Fund at the same time, and if the Fund’s trading advisor was unable to offset futures interests positions of the Fund, the Fund could lose all of its assets and the Members would realize a 100% loss. The Fund, the Managing Member and the CTAs minimize market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 40%.
In addition to market risk, in entering into futures and options on futures contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Fund. The counterparty for futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.
All positions of the Fund are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The securities of the Fund are not traded and no market for the Fund securities is expected to develop. The Fund is engaged in the speculative trading of futures and options on futures. The risks are fully explained in the Fund prospectus delivered to each prospective Member prior to their investment.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The Fund financial statements included in this report, were audited by Patke & Associates, Ltd., 300 Village Green Drive Ste 210, Lincolnshire, IL 60069 and are provided beginning on page. The supplementary financial information specified by Item 302 of Regulation S-K is included in Item 6, Selected Financial Data.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None
Item 9A.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
The Registrant has adopted procedures in connection with the operation of its business including, but not limited to, the review of account statements sent to the Managing Member before the open of business each day that disclose the positions held overnight in the Fund accounts, the margin to hold those positions, and the amount of profit or loss on each position, and the net balance of equity available in each account. The Fund brokerage account statements and financial books and records accounts are prepared by an independent CPA Firm and then are reviewed each quarter and audited each year by a different independent CPA firm.
The Managing Member of the Fund, under the actions of its sole principal, Michael Pacult, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Fund as of the end of the period covered by this Report. Based on their evaluation, Mr. Pacult has concluded that these disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
Section 404 of the Sarbanes-Oxley Act of 2002 requires the Managing Member to evaluate annually the effectiveness of its internal controls over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of its internal control over financial reporting in all annual reports. There were no changes in the Managing Member’s internal control over financial reporting during the quarter ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting applicable to the Fund.
Management’s Annual Report on Internal Control over Financial Reporting
The Managing Member is responsible for establishing and maintaining adequate internal control over the Fund’s financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Managing Member’s internal control over financial reporting includes those policies and procedures that:
·
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Fund’s assets;
·
provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Fund’s financial statements in accordance with generally accepted accounting principles, and that the Fund’s receipts and expenditures are being made only in accordance with authorizations of the Managing Member’s management and directors; and
·
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Fund’s assets that could have a material effect on the Fund’s financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Fund securities are not publicly traded so that there can be no insider trading or leaks of confidential information to the public. All Fund money is on deposit either with a bank, in T-Bills on deposit with the US Treasury, in a 100% Treasury money market fund or a futures commission merchant. There is an audit trail produced by all. A certified public accountant prepares the monthly financial statements. The Fund units are sold during the month at a net asset value to be determined as of the close of business on the last day of trading each month. All quarterly financial statements are reviewed by an independent certified public accountant who audits the Fund financial statements at the end of each calendar year. The Fund maintains its subscription agreements and other records for six years.
The management of the Managing Member assessed the effectiveness of its internal control over financial reporting with respect to the Fund as of December 31, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on its assessment, management has concluded that, as of December 31, 2012, the
Managing Member’s internal control over financial reporting with respect to the Fund is effective based on those criteria.
Item 9B.
Item 9B. Other Information.
None
Part III
Item 10.
Item 10. Directors and Executive Officers and Corporate Governance
The Fund is a Delaware limited liability company which acts through its corporate Managing Member. Accordingly, the Registrant has no Directors or Executive Officers.
The Managing Members of the Registrant are TriView Capital Management, Incorporated, a Delaware corporation, and Michael P. Pacult. The Managing Members are both registered with the National Futures Association as commodity pool operators pursuant to the Commodity Exchange Act, and Mr. Michael Pacult, age 68, is the sole shareholder, director, registered principal and executive officer of the corporate Managing Member. The background and qualifications of Mr. Pacult are disclosed in the Registration Statement, incorporated herein by reference. Mr. Pacult is also a registered representative with Futures Investment Company, the affiliated broker dealer which conducts the “best efforts” offering of the Units.
There has never been a material administrative, civil or criminal action brought against the Fund, the Managing Member or any of its directors, executive officers, promoters or control persons.
No Forms 3, 4, or 5 have been furnished to the Registrant since inception. To the best of the Fund’s knowledge, no such forms have been or are required to be filed.
Audit Committee Financial Expert
Mr. Pacult, in his capacity as the sole principal for the Managing Member of the Fund, has determined that he qualifies as an “audit committee financial expert” in accordance with the applicable rules and regulations of the Securities and Exchange Commission. He is not independent of management.
Code of Ethics
The Fund Managing Member is registered with the National Futures Association as a Commodity Pool Operator and its President, Michael P. Pacult is registered as its principal. Both the Fund and the Managing Member are subject to Federal Commodity Exchange Act and audit for compliance and the rules of good practice of the Commodity Futures Trading Commission and the industry self regulatory organization, the National Futures Association. Having said that, neither the Commodity Futures Trading Commission nor the National Futures Association is responsible for the quality of the Fund disclosures or its operation, those functions are exclusively the responsibility of the Fund and its Managing Member.
Item 11.
Item 11. Executive Compensation.
Although there are no executives of the Fund, the corporate Managing Member and certain persons Affiliated with the Managing Members are paid compensation that the Fund has elected to disclose on this Report. See Item 1 of Part I of this Report for disclosure of such compensation.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) None
(b) As of December 31, 2012, neither the individual nor corporate Managing Member owned any Units of Membership Interests.
(c) The Operating Agreement governs the terms upon which control of the Fund may change. No change in ownership of the Units will, alone, determine the location of control. The Members must have 120 days advance notice and the opportunity to redeem prior to any change in the control from the Managing Member to another Managing Member. Control of the management of the Fund may never vest in one or more Members.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
See Item 11, Executive Compensation and Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The Managing Member has sole discretion over the selection of trading advisors. TriView Capital Management, Inc., the corporate Managing Member, is paid a fixed commission for trades and, therefore, it has a potential conflict in the selection of a CTA that makes few trades rather than produces profits for the Fund. This conflict and others are fully disclosed in the Registration Statement, which is incorporated herein by reference.
Item 14.
Item 14. Principal Accountant Fees and Services.
(1)
Audit Fees
The fees and costs paid to Patke and Associates, Ltd. for the audit of the Fund’s annual financial statements, for review of financial statements included in the Fund’s Forms 10-Q and other services normally provided in connection with regulatory filing or engagements (i.e., consents related to SEC registration statements) for the years ended December 31, 2012 and 2011 were $19,500 and $17,500, respectively.
(2)
Audit Related Fees
None
(3)
Tax Fees
The aggregate fees paid to Patke and Associates, Ltd. for tax compliance services for the years ended December 31, 2012 and 2011 were $2,500 and $2,500, respectively.
(4)
All Other Fees
None
(5)
The Board of Directors of TriView Capital Management, Inc., Managing Member of the Fund, approved all of the services described above. The Board of Directors has determined that the payments made to its independent certified public accountants for these services are compatible with maintaining such auditors’ independence. The Board of Directors explicitly pre-approves all audit and non-audit services and all engagement fees and terms.
(6)
Close to 100% of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time permanent employees. However, all work performed was supervised by a full-time permanent employee.
Part IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
(a)
The following documents are filed as part of this report:
1. All Financial Statements
The Financial Statements begin on page of this report.
2. Financial Statement Schedules required to be filed by Item 8 of this form, and by paragraph (b) below.
Not applicable, not required, or included in the Financial Statements.
3. List of those Exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter) and by paragraph (b) below.
Incorporated by reference from the Fund’s Registration Statement on Form S-1, and all amendments at file No. 333-119655 previously filed with the Securities and Exchange Commission.
31.1 Certification of CEO and CFO pursuant to Section 302
32.2 Certification of CEO and CFO pursuant to Section 906
(b)
Exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).
See response to 15(a)(3), above.
(c)
Financial statements required by Regulation S-X (17 CFR 210) which are excluded from the annual report to shareholders by Rule 14a-3(b) including (1) separate financial statements of subsidiaries not consolidated and fifty percent or less owned persons; (2) separate financial statements of affiliates whose securities are pledged as collateral; and (3) schedules.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K for the period ended December 31, 2012, to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant:
TriView Global Fund, LLC
By TriView Capital Management, Inc.
Its Managing Member
Date: April 1, 2013
By: /s/ Michael Pacult
Mr. Michael P. Pacult
Sole Director, Sole Shareholder
President and Treasurer
TRIVIEW GLOBAL FUND, LLC
(A Delaware Limited Liability Company)
ANNUAL REPORT
December 31, 2012
MANAGING MEMBER:
Triview Capital Management, Inc.
% Corporate Systems, Inc.
505 Brookfield Drive
Dover, Kent County, Delaware 19901
Patke & Associates, Ltd.
Certified Public Accountants
Report of Independent Registered Public Accounting Firm
To the Members of
TriView Global Fund, LLC
We have audited the accompanying statements of assets and liabilities of TriView Global Fund, LLC (a Delaware limited liability company) as of December 31, 2012 and 2011, including the condensed schedule of investments as of December 31, 2011, and the related statements of operations, changes in net assets and cash flows for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the Company's internal control over financial reporting. Accordingly, we do not express such an opinion. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TriView Global Fund, LLC as of December 31, 2012 and 2011, and the results of its operations, its changes in net assets and its cash flows for each of the three years in the period ended December 31, 2012 are in conformity with accounting principles generally accepted in the United States of America.
/s/ Patke & Associates, Ltd.
Patke & Associates, Ltd.
Lincolnshire, Illinois
March 18, 2013
300 Village Green Drive, Suite 210 * Lincolnshire, Illinois 60069
Phone: (847) 913-5400 * Fax: (847) 913-5435
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
TriView Global Fund, LLC
(A Delaware Limited Liability Company)
Notes to the Financial Statements
December 31, 2012
2.
Significant Accounting Policies - Continued
Fair Value Measurement and Disclosures - Accounting Standards Codification ("ASC") 820, establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for an asset or liability, including the Fund’s own assumptions used in determining the fair value of investments. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of and for the year ended December 31, 2012 and 2011, the Fund did not have any Level 3 assets or liabilities.
Derivative financial instruments, such as futures contracts, which are listed on a national exchange, are valued based on quoted prices from the exchange. To the extent these financial instruments are actively traded, and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy.
The following table sets forth by level within the fair value hierarchy the Fund's investments accounted for at fair value on a recurring basis as of December 31, 2011. There were no investments as of December 31, 2012.
Fair Value at December 31, 2011
Description
Level 1
Level 2
Level 3
Total
Exchange Traded - Futures Contracts
$ (7,430)
$ -
$ -
$ (7,430)
Total
$ (7,430)
$ -
$ -
$ (7,430)
Income Taxes - The Fund prepares calendar year U.S. Federal and applicable state information tax returns and reports to the partners their allocable shares of the Fund’s income, expenses and trading gains or losses. No provision for income taxes has been made in the accompanying financial statements as each partner is individually responsible for reporting income or loss based on such partner’s respective share of the Fund’s income and expenses as reported for income tax purposes.
Management has continued to evaluate the application of ASC 740, "Income Taxes" to the Fund and has determined that ASC 740 does not have a material impact on the Fund's financial statements. The Fund files federal and state tax returns. The 2009 through 2012 tax years generally remain subject to examination for the U.S. federal and most state tax authorities.
Statement of Cash Flows - For the purposes of the Statement of Cash Flows, the Fund considers all short-term investments with an original maturity of three months or less to be cash equivalents. Net cash used in operating activities includes no cash payments for interest or income taxes for the years ended December 31, 2012, 2011 or 2010.
Foreign Currency - The accounting records of the Fund are denominated in U.S. dollars. Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Commodity futures contracts transactions are translated into U.S. dollars at the exchange rates on the dates of such transactions. On the accompanying financial statements, effects of changes in exchange rates from all transactions denominated in currencies other than U.S. dollars are disclosed separately.
Use of Accounting Estimates - The preparation of financial statements in conformity with GAAP 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
TriView Global Fund, LLC
(A Delaware Limited Liability Company)
Notes to the Financial Statements
December 31, 2012
3.
Managing Member Duties
The responsibilities of the Managing Member, in addition to directing the trading and investment activity of the Fund, including suspending all trading, includes executing and filing all necessary legal documents, statements and certificates of the Fund, retaining independent public accountants to audit the Fund, employing attorneys to represent the Fund, reviewing the brokerage commission rates to determine reasonableness, maintaining the tax status of the Fund, maintaining a current list of the names, addresses and numbers of units owned by each Member and taking such other actions as deemed necessary to manage the business of the Fund.
If the net unit value of the Fund falls to less than 50% of the greater of the original $1,000 selling price, less commissions and other charges or such higher value earned through trading, then the Managing Member will immediately suspend all trading, provide all members with notice of the reduction in net unit value and give all members the opportunity, for fifteen days after such notice, to redeem Units. No trading shall commence until after the lapse of such fifteen day period.
4.
The Limited Liability Company ("LLC") Agreement
The LLC Operating Agreement provides, among other things, that-
Capital Account - A capital account shall be established for each member. The initial balance of each member's capital account shall be the amount of the initial contributions to the Fund.
Monthly Allocations - Any increase or decrease in the Fund's net asset value as of the end of a month shall be credited or charged to the capital account of each Member in the ratio that the balance of each account bears to the total balance of all accounts.
Any distribution from profits or members' capital will be made solely at the discretion of the Managing Member.
Federal Income Tax Allocations - As of the end of each fiscal year, the Fund's realized capital gain or loss and ordinary income or loss shall be allocated among the Members, after having given effect to the fees and expenses of the Fund.
Subscriptions - Investors must submit subscription agreements and funds at least five business days prior to month end. Subscriptions must be accepted or rejected by the Managing Member within five business days. The investor also has five business days to withdraw his subscription. Funds are deposited into an interest bearing subscription account and will be transferred to the Fund's account after the minimum to commence business has been raised and, thereafter, on the first business day of the month after the subscription is accepted. Interest earned on the subscription funds will accrue to the account of the investor. FIC, as selling agent, receives a 6% selling commission on new subscriptions calculated on the gross subscription amount. For the year ended December 31, 2012, selling commissions earned by FIC were $14,000.
Redemptions - A member may request any or all of his investment be redeemed at the net asset value as of the end of a month. Unless this requirement is waived, the written request must be received by the managing member no less than ten business days prior to a month end. Redemptions will generally be paid within twenty days of the effective month end. However, in various circumstances due to liquidity, etc. the Managing Member may be unable to comply with the request on a timely basis. There will be no redemption fee; however there will be a twelve month lock-in commencing from the date of admission of an investment.
5.
Fees
The Fund was initially charged the following fees after the commencement of trading.
A monthly management fee of 2.5% (annual rate) paid to the Corporate Managing Member, calculated on the Fund's prior month-end net assets. Brokerage commissions to the Fund's affiliated introducing broker, FIC, of $15 per round turn.
As of September 1, 2011, the Fund no longer paid FIC round turn brokerage commissions and no longer paid the Corporate Managing Member a management fee. Instead, the Fund is charged 10% (annual rate) fixed brokerage commissions, paid monthly, calculated on the prior month-end net assets, with 7.5% paid to FIC and 2.5% to the Corporate Managing Member.
A monthly management fee of 1% (annual rate) paid to GT Capital calculated on the prior month-end equity allocated to it to trade.
A quarterly incentive fee of 20% of new net profits paid to GT Capital. In October 2011, the Managing Member allocated approximately 50% of Fund trading equity to a separate program offered by GT Capital maintained in a separate account at the FCM, held in the name of the Fund. For purposes of calculating the quarterly incentive fee, the net performance of both programs is combined. The incentive fee for the years ended December 31, 2012, December 31, 2011, and December 31, 2010 were $0, $2,438, and $0 respectively.
The Managing Member has reserved the right to implement a management fee and change the incentive fee at its sole discretion. The total incentive fees may be increased to 27% if the management fee is zero. The Fund may also increase the total management fees paid to the CTA's and Corporate Managing Member to 6% of total net assets if the total incentive fees are decreased to 15%.
TriView Global Fund, LLC
(A Delaware Limited Liability Company)
Notes to the Financial Statements
December 31, 2012
7.
Trading Activities and Related Risks
The Fund is engaged in speculative trading of U.S. and foreign futures contracts. The Fund is exposed to both market risk, the risk arising from changes in market value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract.
A certain portion of cash in trading accounts are pledged as collateral for futures trading on margin. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker's proprietary activities.
Each U.S. commodity exchange with the approval of the CFTC establishes minimum margin requirements for each traded contract. The FCM may increase the margin requirements above these minimums for any or all contracts. The Fund maintains cash and cash equivalents to satisfy these margin requirements. At December 31, 2012 and 2011, these totaled $637,662 and $1,551,960, respectively. Based upon the types and amounts of contracts traded and the amount of liquid assets of the Fund, the Managing Member believes there is minimal risk of not being able to meet its margin requirement.
Trading in futures contracts involves entering into contractual commitments to purchase or sell a particular futures contracts at a specified date and price. The gross or face amount of the contract, which is typically many times that of the Fund's net assets being traded, significantly exceeds the Fund's future cash requirements since the Fund intends to close out its open positions prior to settlement. As a result, the Fund is generally subject only to the risk of loss arising from the change in the value of the contracts. The market risk is limited to the gross or face amount of the contracts held on long positions, of which there were none at December 31, 2012 and approximately $26,901 at December 31, 2011. However, when the Fund enters into a contractual commitment to sell commodities, it must make delivery of the underlying commodity at the contract price and then repurchase the contract at prevailing market prices or settle in cash. Since the repurchase price to which a commodity can rise is unlimited, entering into commitments to sell commodities exposes the Fund to unlimited potential risk.
Market risk is influenced by a wide variety of factors including government programs and policies, political and economic events, the level and volatility of interest rates, foreign currency exchange rates, the diversification effects among the derivative instruments the Fund holds and the liquidity and inherent volatility of the markets in which the Fund trades.
There were no open futures contracts at December 31, 2012. The net unrealized loss on open futures contracts at December 31, 2011 was $7,430.
TriView Global Fund, LLC
(A Delaware Limited Liability Company)
Notes to the Financial Statements
December 31, 2012
8.
Derivative Financial Instruments and Fair Value of Financial Instruments
A derivative financial instrument is a financial agreement whose value is linked to, or derived from, the performance of an underlying asset. The underlying asset can be currencies, commodities, interest rates, stocks, or any combination. Changes in the underlying asset indirectly affect the value of the derivative. As the instruments are recognized at fair value, those changes directly affect reported income.
All investment holdings are recorded in the statement of assets and liabilities at their net asset value (fair value) at the reporting date. Financial instruments (including derivatives) used for trading purposes are recorded in the statement of assets and liabilities at fair value at the reporting date. Realized and unrealized changes in fair values are recognized in net investment gain (loss) in the period in which the changes occur. Interest income arising from trading instruments is included in the statement of operations as part of interest income.
Notional amounts are equivalent to the aggregate face value of the derivative financial instruments. Notional amounts do not represent the amounts exchanged by the parties to derivatives and do not measure the Fund’s exposure to credit or market risks. The amounts exchanged are based on the notional amounts and other terms of the derivatives.
9.
Financial Instruments with Off-Balance Sheet Credit and Market Risk
All financial instruments are subject to market risk, the risk that future changes in market conditions may make an instrument less valuable or more onerous. As the instruments are recognized at fair value, those changes directly affect reported income.
Included in the definition of financial instruments are securities, restricted securities and derivative financial instruments. Theoretically, the investments owned by the Fund directly are exposed to a market risk (loss) equal to the notional value of the financial instruments purchased and substantial liability on certain financial instruments purchased short. Generally, financial instruments can be closed. However, if the market is not liquid, it could prevent the timely close-out of any unfavorable positions or require the Fund to hold those positions to maturity, regardless of the changes in their value or the trading advisor’s investment strategies.
Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed to perform as contracted. Concentrations of credit risk (whether on or off balance sheet) that arise from financial instruments exist for groups of counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.
10.
Indemnifications
In the normal course of business, the Fund enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The Fund expects the risk of any future obligation under these indemnifications to be remote.