**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

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

 

**For the quarterly period ended September 30, 2012**

 

**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  0-54573**

 

**HIGHBRIDGE COMMODITIES FUTURESACCESS LLC**

(Exact Name of Registrant as specified in its charter)

 

| **Delaware**                    | ** ** | **45-2608276**                    |
|---------------------------------|------------|-----------------------------------|
| (State or other jurisdiction of |       | (IRS Employer Identification No.) |
| incorporation or organization)  |       |                              |

 

**c/o Merrill Lynch Alternative Investments LLC**

**Four World Financial Center, 10****TH**** Floor**

**250 Vesey Street**

**New York, New York 10080**

(Address of principal executive offices)

(Zip Code)

 

**212-449-3517**

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

| Large accelerated filer o                     |   | Accelerated filer o         |
|-----------------------------------------------|--------|-----------------------------|
|                                          |   |                        |
| Non-accelerated filer x                       |   | Smaller reporting company o |
| (Do not check if a smaller reporting company) |   |                        |

 

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

 

As of September 30, 2012, 45,714,101 units of limited liability company interest were outstanding.

 

 

 

----

 

**HIGHBRIDGE COMMODITIES FUTURESACCESS LLC**

 

QUARTERLY REPORT FOR SEPTEMBER 30, 2012 ON FORM 10-Q

 

Table of Contents

 
| ** ** | ** **                                                                                   | **PAGE** |
|------------|----------------------------------------------------------------------------------------------|----------|
|       | PART I—FINANCIAL INFORMATION                                                       |     |
|       |                                                                                         |     |
| Item   1.  | Financial   Statements                                                                       | 1        |
|       |                                                                                         |     |
| Item   2.  | Management’s   Discussion and Analysis of Financial Condition and Results of Operations | 17       |
|       |                                                                                         |     |
| Item   3.  | Quantitative   and Qualitative Disclosures About Market Risk                                 | 23       |
|       |                                                                                         |     |
| Item   4.  | Controls   and Procedures                                                                    | 27       |
|       |                                                                                         |     |
|       | PART II—OTHER INFORMATION                                                          |     |
|       |                                                                                         |     |
| Item   1.  | Legal   Proceedings                                                                          | 27       |
|       |                                                                                         |     |
| Item   1A. | Risk   Factors                                                                               | 27       |
|       |                                                                                         |     |
| Item   2.  | Unregistered   Sales of Equity Securities and Use of Proceeds                                | 28       |
|       |                                                                                         |     |
| Item   3.  | Defaults   Upon Senior Securities                                                            | 29       |
|       |                                                                                         |     |
| Item   4.  | Mine   Safety Disclosures                                                                    | 29       |
|       |                                                                                         |     |
| Item   5.  | Other   Information                                                                          | 29       |
|       |                                                                                         |     |
| Item   6   | Exhibits                                                                                     | 29       |

 

----

 

PART I - FINANCIAL INFORMATION

 

Item 1.   Financial Statements

 

HIGHBRIDGE COMMODITIES FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF FINANCIAL CONDITION

(unaudited)

 
| ** **                                                                           | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                           | ** ** | **2012**               | ** ** | **2011**              | ** ** |
| **ASSETS:**                                                                          |       |                   |       |                  |       |
|                                                                                 |       |                   |       |                  |       |
| Investment in Highbridge Commodities FuturesAccess   Master Fund                     |       | $                      | 39,876,603 |                  | $          | 17,568,247 |   |
| Receivable from Highbridge Commodities   FuturesAccess Master Fund                   |       | 241,729                |       | 10,024,233            |       |
| Cash                                                                                 |       | 174,450                |       | 18,038                |       |
| Other assets                                                                         |       | 75,000                 |       | 33,955                |       |
|                                                                                 |       |                   |       |                  |       |
| **TOTAL ASSETS**                                                                     |       | $                      | 40,367,782 |                  | $          | 27,644,473 |   |
|                                                                                 |       |                   |       |                  |       |
| **LIABILITIES AND MEMBERS’ CAPITAL:**                                           |       |                   |       |                  |       |
| LIABILITIES:                                                                         |       |                   |       |                  |       |
| Sponsor fee payable                                                                  |       | 56,807                 |       | 5,006                 |       |
| Redemptions payable                                                                  |       | 241,729                |       | 10,024,233            |       |
| Other liabilities                                                                    |       | 158,285                |       | 115,972               |       |
|                                                                                 |       |                   |       |                  |       |
| Total liabilities                                                                    |       | 456,821                |       | 10,145,211            |       |
|                                                                                 |       |                   |       |                  |       |
| MEMBERS’ CAPITAL:                                                               |       |                   |       |                  |       |
| Members’ Interest (45,714,101 Units and 18,534,585   Units)                     |       | 39,910,961             |       | 17,499,262            |       |
| Total members’ capital                                                          |       | 39,910,961             |       | 17,499,262            |       |
|                                                                                 |       |                   |       |                  |       |
| **TOTAL LIABILITIES AND MEMBERS’   CAPITAL**                                    |       | $                      | 40,367,782 |                  | $          | 27,644,473 |   |
|                                                                                 |       |                   |       |                  |       |
| **NET ASSET VALUE PER UNIT:**                                                        | ** ** | ** **             | ** ** |                  | ** ** |
| (Based on 45,714,101 and 18,534,585 Units   outstanding, unlimited Units authorized) | ** ** | ** **             | ** ** |                  | ** ** |
| Class A                                                                         |       | $                      | 0.8707     |                  | $          | 0.9385 |   |
| Class C                                                                         |       | $                      | 0.8628     |                  | $          | 0.9370 |   |
| Class D                                                                         |       | $                      | 0.9113     |                  | $          | 0.9713 |   |
| Class I                                                                         |       | $                      | 0.8739     |                  | $          | 0.9392 |   |
| Class Z                                                                         |       | $                      | —     |                  | $          | 0.9409 |   |

 

See notes to financial statements.

 

1

----

 

HIGHBRIDGE COMMODITIES FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 
| ** **                                                                                                                        | ** ** | **For the three months    ended** | ** ** | **For the nine months    ended** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                                                                        | ** ** | **September 30, 2012**                      | ** ** | **September 30, 2012**                     | ** ** |
| **NET INVESTMENT INCOME (LOSS)   ALLOCATED FROM HIGHBRIDGE COMMODITIES FUTURESACCESS MASTER FUND LTD:**                           | ** ** | ** **                                            |       |                                                 |       |
|                                                                                                                              |       |                                                  |       |                                                 |       |
| Management fees                                                                                                                   |       | $                                                     | (145,540   | )                                                    | $          | (331,246 | ) |
| Performance fees                                                                                                                  |       | —                                                |       | (15,312                                              | )          |
| Other                                                                                                                             |       | (39,774                                               | )          | (136,937                                             | )          |
|                                                                                                                              |       |                                                  |       |                                                 |       |
| Total net investment income (loss) allocated from   Highbridge Commodities FuturesAccess Master Fund Ltd                          |       | (185,314                                              | )          | (483,495                                             | )          |
|                                                                                                                              |       |                                                  |       |                                                 |       |
| **FUND EXPENSES:**                                                                                                                |       |                                                  |       |                                                 |       |
| Sponsor fees                                                                                                                      |       | 163,666                                               |       | 335,085                                              |       |
| Other                                                                                                                             |       | 95,894                                                |       | 261,425                                              |       |
| Total Fund expenses                                                                                                               |       | 259,560                                               |       | 596,510                                              |       |
|                                                                                                                              |       |                                                  |       |                                                 |       |
| **NET INVESTMENT INCOME PROFIT   (LOSS)**                                                                                         |       | (444,874                                              | )          | (1,080,005                                           | )          |
|                                                                                                                              |       |                                                  |       |                                                 |       |
| **REALIZED AND UNREALIZED PROFIT   (LOSS) ON INVESTMENTS ALLOCATED FROM HIGHBRIDGE COMMODITIES FUTURESACCESS   MASTER FUND LTD:** |       |                                                  |       |                                                 |       |
| Realized, net                                                                                                                     |       | (272,744                                              | )          | (2,262,953                                           | )          |
| Change in unrealized, net                                                                                                         |       | 233,590                                               |       | 223,122                                              |       |
| Brokerage commissions                                                                                                             |       | (23,003                                               | )          | (69,806                                              | )          |
| Net profit (loss) from derivative contracts                                                                                       |       | (62,157                                               | )          | (2,109,637                                           | )          |
|                                                                                                                              |       |                                                  |       |                                                 |       |
| **NET PROFIT (LOSS)**                                                                                                             |       | $                                                     | (507,031   | )                                                    | $          | (3,189,642 | ) |
|                                                                                                                              |       |                                                  |       |                                                 |       |
| **NET INCOME (LOSS) PER UNIT:**                                                                                                   |       |                                                  |       |                                                 |       |
|                                                                                                                              |       |                                                  |       |                                                 |       |
| Weighted average number of Units outstanding                                                                                      |       |                                                  |       |                                                 |       |
| Class A                                                                                                                      |       | 11,813,871                                            |       | 8,312,296                                            |       |
| Class C                                                                                                                      |       | 19,948,837                                            |       | 12,900,785                                           |       |
| Class D                                                                                                                      |       | 6,140,976                                             |       | 5,062,405                                            |       |
| Class I                                                                                                                      |       | 5,308,522                                             |       | 3,605,235                                            |       |
| Class Z*                                                                                                                     |       | —                                                |       | 7,965,776                                            |       |
|                                                                                                                              |       |                                                  |       |                                                 |       |
| Net income (loss) per weighted average Unit                                                                                       |       |                                                  |       |                                                 |       |
| Class A                                                                                                                      |       | $                                                     | (0.0069    | )                                                    | $          | (0.1367 | ) |
| Class C                                                                                                                      |       | $                                                     | (0.0153    | )                                                    | $          | (0.1425 | ) |
| Class D                                                                                                                      |       | $                                                     | (0.0053    | )                                                    | $          | (0.0963 | ) |
| Class I                                                                                                                      |       | $                                                     | (0.0164    | )                                                    | $          | (0.1508 | ) |
| Class Z*                                                                                                                     |       | $                                                     | —     |                                                 | $          | 0.1024 |   |

 

----

*Units fully redeemed as of February 29, 2012. (Presentation of weighted average units outstanding and net income (loss) per weighted average units for this share class is for the period January 1, 2012 to February 29, 2012.)

 

See notes to financial statements.

 

2

----

 

HIGHBRIDGE COMMODITIES FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENT OF CHANGES IN MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited) (in Units)

 
| ** **                | ** ** | **Members’ Capital    December 31, 2011** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital    September 30, 2012** | ** ** |
|---------------------------|------------|--------------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|---------------------------------------------------------------------|------------|
| Class A              |       | 1,067,047                                                          |       | 11,339,403        |       | (557,384        | )          | 11,849,066                                                          |       |
| Class C              |       | 1,858,272                                                          |       | 19,970,503        |       | (464,023        | )          | 21,364,752                                                          |       |
| Class D              |       | 2,313,375                                                          |       | 4,038,683         |       | —          |       | 6,352,058                                                           |       |
| Class I              |       | 78,014                                                             |       | 6,070,211         |       | —          |       | 6,148,225                                                           |       |
| Class Z*             |       | 13,217,877                                                         |       | —            |       | (13,217,877     | )          | —                                                              |       |
|                      |       |                                                               |       |              |       |            |       |                                                                |       |
| Total Members’ Units |       | 18,534,585                                                         |       | 41,418,800        |       | (14,239,284     | )          | 45,714,101                                                          |       |

 

----

*Units fully redeemed as of February 29, 2012.

 

See notes to financial statements.

 

3

----

 

HIGHBRIDGE COMMODITIES FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENT OF CHANGES IN MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 
| ** **                  | ** ** | **Members’ Capital   December 31, 2011** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net    Income(loss)** | ** **  | **Members’ Capital   September 30, 2012** | ** ** |
|-----------------------------|------------|--------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|------------------------------|-------------|---------------------------------------------------------------|------------|
| Class A                |       | $                                                            | 1,001,468  |              | $          | 10,965,976      |       | $                            | (514,500    | )                                                             | $          | (1,136,365 | ) | $ | 10,316,579 |   |
| Class C                |       | 1,741,170                                                    |       | 18,941,272        |       | (411,446        | )          | (1,838,289                   | )           | 18,432,707                                                    |       |
| Class D                |       | 2,246,958                                                    |       | 4,028,957         |       | —          |       | (487,331                     | )           | 5,788,584                                                     |       |
| Class I                |       | 73,268                                                       |       | 5,843,393         |       | —          |       | (543,570                     | )           | 5,373,091                                                     |       |
| Class Z*               |       | 12,436,398                                                   |       | —            |       | (13,252,311     | )          | 815,913                      |        | —                                                        |       |
|                        |       |                                                         |       |              |       |            |       |                         |        |                                                          |       |
| Total Members’ Capital |       | $                                                            | 17,499,262 |              | $          | 39,779,598      |       | $                            | (14,178,257 | )                                                             | $          | (3,189,642 | ) | $ | 39,910,961 |   |

 

----

*Units fully redeemed as of February 29, 2012.

 

See notes to financial statements.

 

4

----

 

HIGHBRIDGE COMMODITIES FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

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

 

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

 
| ** **                                                        | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** |
|-------------------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| **Per Unit Operating Performance:**                |       |             |       |             |       |             |       |             |       |
|                                                              |       |             |       |             |       |             |       |             |       |
| Net asset value, beginning of period                              |       | $                | 0.8773     |             | $          | 0.8715           |       | $                | 0.9148     |   | $ | 0.8797 |   |
|                                                              |       |             |       |             |       |             |       |             |       |
| Net realized and net change in unrealized trading profit   (loss) |       | (0.0010          | )          | (0.0010          | )          | (0.0012          | )          | (0.0011          | )          |
| Expenses                                                          |       | (0.0056          | )          | (0.0077          | )          | (0.0023          | )          | (0.0047          | )          |
| Net asset value, end of period                                    |       | $                | 0.8707     |             | $          | 0.8628           |       | $                | 0.9113     |   | $ | 0.8739 |   |
|                                                              |       |             |       |             |       |             |       |             |       |
| **Total Return: (a)**                                             |       |             |       |             |       |             |       |             |       |
|                                                              |       |             |       |             |       |             |       |             |       |
| Total return before Performance fees                              |       | -0.76            | %          | -1.00            | %          | -0.38            | %          | -0.66            | %          |
| Performance fees                                                  |       | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00             | %          |
| Total return after Performance fees                               |       | -0.76            | %          | -1.00            | %          | -0.38            | %          | -0.66            | %          |
|                                                              |       |             |       |             |       |             |       |             |       |
| **Ratios to Average Member’s   Capital:**                    |       |             |       |             |       |             |       |             |       |
|                                                              |       |             |       |             |       |             |       |             |       |
| Expenses (excluding Performance fees)                             |       | 0.62             | %          | 0.87             | %          | 0.25             | %          | 0.52             | %          |
| Performance fees                                                  |       | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00             | %          |
| Expenses (including Performance fees)                             |       | 0.62             | %          | 0.87             | %          | 0.25             | %          | 0.52             | %          |
|                                                              |       |             |       |             |       |             |       |             |       |
| Net investment income (loss)                                      |       | -0.62            | %          | -0.87            | %          | -0.25            | %          | -0.52            | %          |

 

----

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

 

See notes to financial statements.

 

5

----

 

HIGHBRIDGE COMMODITIES FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

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

 

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

 
| ** **                                                        | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** | **Class Z*** | ** ** |
|-------------------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|-------------------|------------|
| **Per Unit Operating Performance:**                |       |             |       |             |       |             |       |             |       |              |       |
| ** **                                                        |       |             |       |             |       |             |       |             |       |              |       |
| Net asset value, beginning of period                              |       | $                | 0.9385     |             | $          | 0.9370           |       | $                | 0.9713     |              | $          | 0.9392 |   | $ | 0.9409 |   |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Net realized and net change in unrealized trading   profit (loss) |       | (0.0481          | )          | (0.0476          | )          | (0.0506          | )          | (0.0484          | )          | 0.0764            |       |
| Expenses                                                          |       | (0.0197          | )          | (0.0266          | )          | (0.0094          | )          | (0.0169          | )          | (0.0031           | )          |
| Net asset value, before liquidation                               |       | 0.8707           |       | 0.8628           |       | 0.9113           |       | 0.8739           |       | 1.0142            |       |
| Less liquidating distribution                                     |       | —           |       | —           |       | —           |       | —           |       | 1.0142            |       |
| Net asset value, end of period                                    |       | $                | 0.8707     |             | $          | 0.8628           |       | $                | 0.9113     |              | $          | 0.8739 |   | $ | — |   |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| **Total Return: (b)**                                             |       |             |       |             |       |             |       |             |       |              |       |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Total return before Performance fees                              |       | -7.23            | %          | -7.92            | %          | -6.18            | %          | -6.95            | %          | 7.80              | %          |
| Performance fees                                                  |       | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00              | %          |
| Total return after Performance fees                               |       | -7.23            | %          | -7.92            | %          | -6.18            | %          | -6.95            | %          | 7.80              | %          |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| **Ratios to Average Member’s   Capital: (a) **          |       |             |       |             |       |             |       |             |       |              |       |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Expenses (excluding Performance fees)                             |       | 2.07             | %          | 2.82             | %          | 0.95             | %          | 1.77             | %          | 0.30              | %          |
| Performance fees                                                  |       | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00              | %          |
| Expenses (including Performance fees)                             |       | 2.07             | %          | 2.82             | %          | 0.95             | %          | 1.77             | %          | 0.30              | %          |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Net investment income (loss)                                      |       | -2.07            | %          | -2.82            | %          | -0.95            | %          | -1.77            | %          | -0.30             | %          |

 

----

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

 

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

 

*Units fully redeemed as of February 29, 2012.

 

See notes to financial statements.

 

6

----

 

HIGHBRIDGE COMMODITIES FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Highbridge Commodities FuturesAccess LLC (the “Fund”), a Merrill Lynch FuturesAccessSM Program (“FuturesAccess”), fund was organized under the Delaware Limited Liability Company Act on June 15, 2011 and commenced trading activities on November 1, 2011. The Fund issues new units of limited liability company interest (“Units”) at Net Asset Value per Unit (see Item 2 for discussion of net asset value and net asset value per unit for subscriptions and redemptions purposes hereinafter referred to as Net Asset Value and Net Asset Value per Unit) as of the beginning of each calendar month. The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. The Fund is part of a master-feeder structure that currently invests substantially all of its assets through Highbridge Commodities FuturesAccess Master Fund Ltd. (the “Master Fund”), which has the same investment objective as the Fund. The Master Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities.  The Sponsor expects that on or about December 31, 2012, the Fund will no longer invest substantially all of its assets through the Master Fund and will instead invest substantially all of its assets directly through a managed futures account advised by the trading advisor.  Highbridge Capital Management, LLC (“HCM” or “trading advisor”) is the trading advisor of the Master Fund. References to the Fund’s activities, expenses and portfolio in this Form 10-Q include those of the Master Fund, unless the context requires otherwise.

 

Merrill Lynch Alternative Investments LLC (“MLAI” or the “Sponsor”) is the Sponsor of the Fund. MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are sometimes referred to herein as “BAC”.  Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) is currently the exclusive futures clearing broker for the Fund.  The Sponsor may select other parties as futures clearing broker(s).  Currently, the Fund does not trade currency spot and forward contracts.  In the event the Fund does trade such contracts, Merrill Lynch International Bank, Ltd. (“MLIB”) may be the primary foreign exchange (“F/X”) forward prime broker for the Fund.  The Sponsor may select other third parties as F/X or other over-the-counter (“OTC”) prime brokers, including Bank of America N.A. (“BANA”).  MLPF&S, MLIB and BANA are BAC affiliates.

 

FuturesAccess offers investors the opportunity to allocate and reallocate capital among a number of managed futures and other commodity trading advisors collectively employing different technical, fundamental, systematic and/or discretionary trading strategies or to those fund of funds for which MLAI allocates capital to a number of trading advisors.

 

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

 

In the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of the Fund as of  September 30, 2012 and December 31, 2011 and the results of its operations for the three 

 

7

----

 

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

 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the period ended December 31, 2011.

 

Estimates

 

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

 

Initial Offering and Organizational Costs

 

Organization and Offering costs are amortized against the net asset value over 60 months, beginning with the first month-end after the initial issuance of Units for operational and investor trading purposes. However, for financial reporting purposes, organizational costs, to the extent material, will be shown as deducted from net asset value as of the date of such initial issuance. Initial offering costs, to the extent material, will be amortized over a 12-month period after the initial issuance of Units.

 

8

----

 

2.              INVESTMENT IN MASTER FUND

 

The Master Fund’s Statements of Financial Condition and Schedule of Investments as of September 30, 2012 and December 31, 2011 and the Statements of Operations for the three and nine months ended September 30, 2012 are presented below.

 

HIGHBRIDGE COMMODITIES FUTURESACCESS MASTER FUND LTD.

(a Cayman Islands Company)

 

STATEMENTS OF FINANCIAL CONDITION

(unaudited)

 
| ** **                                                                                                  | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                  | ** ** | **2012**               | ** ** | **2011**              | ** ** |
| **ASSETS:**                                                                                                 |       |                   |       |                  |       |
| Equity in commodity trading accounts:                                                                       |       |                   |       |                  |       |
| Cash (including restricted cash of $6,553,861 for   2012 and $3,818,791 for 2011)                           |       | $                      | 12,827,880 |                  | $          | 27,850,419 |   |
| Net unrealized profit on open futures contracts                                                             |       | —                 |       | 11,817                |       |
| Cash                                                                                                        |       | 68,857,311             |       | 453,090               |       |
| Other assets                                                                                                |       | 100,000                |       | 10,000                |       |
|                                                                                                        |       |                   |       |                  |       |
| **TOTAL ASSETS**                                                                                            |       | $                      | 81,785,191 |                  | $          | 28,325,326 |   |
|                                                                                                        |       |                   |       |                  |       |
| **LIABILITIES AND MEMBERS’ CAPITAL:**                                                                  |       |                   |       |                  |       |
| LIABILITIES:                                                                                                |       |                   |       |                  |       |
| Net unrealized loss on open futures contracts                                                               |       | $                      | 276,222    |                  | $          | 539,172 |   |
| Advisory fees payable                                                                                       |       | 101,565                |       | 34,534                |       |
| Redemptions payable                                                                                         |       | 9,868,874              |       | 10,024,233            |       |
| Other liabilities                                                                                           |       | 256,735                |       | 159,140               |       |
|                                                                                                        |       |                   |       |                  |       |
| Total liabilities                                                                                           |       | 10,503,396             |       | 10,757,079            |       |
|                                                                                                        |       |                   |       |                  |       |
| Shareholders’ Equity:                                                                                  |       |                   |       |                  |       |
| Shareholders’ Equity (77,712,934 Units and   18,554,920 Units outstanding, unlimited Units authorized) |       | 71,281,795             |       | 17,568,247            |       |
| Total members’ capital                                                                                 |       | 71,281,795             |       | 17,568,247            |       |
|                                                                                                        |       |                   |       |                  |       |
| **TOTAL LIABILITIES AND MEMBERS’   CAPITAL**                                                           |       | $                      | 81,785,191 |                  | $          | 28,325,326 |   |
|                                                                                                        |       |                   |       |                  |       |
| **NET ASSET VALUE PER UNIT:**                                                                               | ** ** | ** **             | ** ** |                  | ** ** |
|                                                                                                        |       |                   |       |                  |       |
| Class DA                                                                                               |       | $                      | 0.8964     |                  | $          | 0.9468 |   |
| Class DI                                                                                               |       | $                      | 0.8906     |                  | $          | — |   |
| Class DU                                                                                               |       | $                      | 0.9450     |                  | $          | — |   |

 

9

----

 

HIGHBRIDGE COMMODITIES FUTURESACCESS MASTER FUND LTD.

(a Cayman Islands Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 
| ** **                                   | ** ** | **For the three months   ended** | ** ** | **For the nine months   ended** | ** ** |
|----------------------------------------------|------------|-------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                   | ** ** | **September 30, 2012**                | ** ** | **September 30, 2012**               | ** ** |
| **TRADING PROFIT (LOSS):**                   | ** ** | ** **                                      | ** ** | ** **                                     | ** ** |
|                                         |       |                                            |       |                                           |       |
| Realized, net                                |       | $                                               | (527,912   | )                                              | $          | (4,232,023 | ) |
| Change in unrealized, net                    |       | 661,098                                         |       | 251,133                                        |       |
| Brokerage commissions                        |       | (47,981                                         | )          | (137,497                                       | )          |
|                                         |       |                                            |       |                                           |       |
| Total trading profit (loss), net             |       | 85,205                                          |       | (4,118,387                                     | )          |
|                                         |       |                                            |       |                                           |       |
| **EXPENSES:**                                |       |                                            |       |                                           |       |
| Management fee                               |       | 303,712                                         |       | 655,024                                        |       |
| Performance fee                              |       | —                                          |       | 26,577                                         |       |
| Other                                        |       | 83,134                                          |       | 267,287                                        |       |
| Total expenses                               |       | 386,846                                         |       | 948,888                                        |       |
|                                         |       |                                            |       |                                           |       |
| **NET INVESTMENT INCOME (LOSS)**             |       | (386,846                                        | )          | (948,888                                       | )          |
|                                         |       |                                            |       |                                           |       |
| **NET INCOME (LOSS)**                        |       | $                                               | (301,641   | )                                              | $          | (5,067,275 | ) |
|                                         |       |                                            |       |                                           |       |
| **NET INCOME (LOSS) PER UNIT:**              |       |                                            |       |                                           |       |
|                                         |       |                                            |       |                                           |       |
| Weighted average number of Units outstanding |       |                                            |       |                                           |       |
| Class DA                                |       | 42,151,787                                      |       | 30,998,019                                     |       |
| Class DI*                               |       | 10,809,730                                      |       | 10,556,473                                     |       |
| Class DU                                |       | 33,229,378                                      |       | 19,913,551                                     |       |
|                                         |       |                                            |       |                                           |       |
| Net income (loss) per weighted average Unit  |       |                                            |       |                                           |       |
| Class DA                                |       | $                                               | (0.0059    | )                                              | $          | (0.0837 | ) |
| Class DI*                               |       | $                                               | (0.0012    | )                                              | $          | (0.1072 | ) |
| Class DU                                |       | $                                               | (0.0012    | )                                              | $          | (0.0674 | ) |

 

----

*Units issued on February 1, 2012.

 

10

----

 

The Master Fund’s investments, defined as net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of September 30, 2012, and December 31, 2011 are as follows:

 

**September 30, 2012**

 
| ** **                  | ** ** | ** **                         | ** ** | ** **               | ** ** | ** **                         | ** ** | ** **                         | ** ** | ** **             | ** ** | ** **                         | ** ** | ** **                      | ** ** | ** **                         | ** ** | ** **                              | ** ** |
|-----------------------------|------------|------------------------------------|------------|--------------------------|------------|------------------------------------|------------|------------------------------------|------------|------------------------|------------|------------------------------------|------------|---------------------------------|------------|------------------------------------|------------|-----------------------------------------|------------|
| ** **                  | ** ** | **Long Positions**            | ** ** | **Short Positions** | ** ** | **Net Unrealized**            | ** ** | ** **                         | ** ** | ** **             | ** ** |
| **Commodity Industry** | ** ** | **Number of**                 | ** ** | **Unrealized**           | ** ** | **Percent of**                | ** ** | **Number of**                 | ** ** | **Unrealized**         | ** ** | **Percent of**                | ** ** | **Profit (Loss)**          | ** ** | **Percent of**                | ** ** | ** **                              | ** ** |
| **Sector**                  | ** ** | **Contracts / Notional** | ** ** | **Profit (Loss)**   | ** ** | **Shareholders’ Equity** | ** ** | **Contracts / Notional** | ** ** | **Profit (Loss)** | ** ** | **Shareholders’ Equity** | ** ** | **on Open Positions** | ** ** | **Shareholders’ Equity** | ** ** | **Maturity Dates**                 | ** ** |
|                        |       |                               |       |                     |       |                               |       |                               |       |                   |       |                               |       |                            |       |                               |       |                                    |       |
| Agriculture                 |       | 819                                |       | $                        | (1,957,860 | )                                  | -2.75      | %                                  | (322       | )                      | $          | 198,155                            |       | 0.28                            | %          | $                                  | (1,759,705 | )                                       | -2.47      | % | November 2012   - February 2013 |   |
| Currencies                  |       | 342                                |       | 431,160                  |       | 0.60                               | %          | —                             |       | —                 |       | 0.00                               | %          | 431,160                         |       | 0.60                               | %          | December 2012                      |       |
| Energy                      |       | 100                                |       | 128,331                  |       | 0.18                               | %          | (100                               | )          | 336,360                |       | 0.47                               | %          | 464,691                         |       | 0.65                               | %          | October   2012                          |       |
| Metals                      |       | 511                                |       | 3,153,416                |       | 4.42                               | %          | (402                               | )          | (2,565,784             | )          | -3.60                              | %          | 587,632                         |       | 0.82                               | %          | October 2012   - January 2013 |       |
|                        |       |                               |       |                     |       |                               |       |                               |       |                   |       |                               |       |                            |       |                               |       |                                    |       |
| Total, net                  |       |                               |       | $                        | 1,755,047  |                               | 2.45       | %                                  |       |                   | $          | (2,031,269                         | )          | -2.85                           | %          | $                                  | (276,222   | )                                       | -0.40      | % |   |   |

 

**December 31, 2011**

 
| ** **                  | ** ** | ** **                         | ** ** | ** **               | ** ** | ** **                         | ** ** | ** **                         | ** ** | ** **             | ** ** | ** **                         | ** ** | ** **                      | ** ** | ** **                         | ** ** | ** **                            | ** ** |
|-----------------------------|------------|------------------------------------|------------|--------------------------|------------|------------------------------------|------------|------------------------------------|------------|------------------------|------------|------------------------------------|------------|---------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| ** **                  | ** ** | **Long Positions**            | ** ** | **Short Positions** | ** ** | **Net Unrealized**            | ** ** | ** **                         | ** ** | ** **             | ** ** |
| **Commodity Industry** | ** ** | **Number of**                 | ** ** | **Unrealized**           | ** ** | **Percent of**                | ** ** | **Number of**                 | ** ** | **Unrealized**         | ** ** | **Percent of**                | ** ** | **Profit (Loss)**          | ** ** | **Percent of**                | ** ** | ** **                            | ** ** |
| **Sector**                  | ** ** | **Contracts / Notional** | ** ** | **Profit (Loss)**   | ** ** | **Shareholders’ Equity** | ** ** | **Contracts / Notional** | ** ** | **Profit (Loss)** | ** ** | **Shareholders’ Equity** | ** ** | **on Open Positions** | ** ** | **Shareholders’ Equity** | ** ** | **Maturity Dates**               | ** ** |
|                        |       |                               |       |                     |       |                               |       |                               |       |                   |       |                               |       |                            |       |                               |       |                                  |       |
| Agriculture                 |       | 480                                |       | $                        | 23,249     |                               | 0.13       | %                                  | (487       | )                      | $          | (2,379                             | )          | -0.01                           | %          | $                                  | 20,870     |                                  | 0.12       | % | February 2012   - July 2012 |   |
| Currencies                  |       | 112                                |       | 52,150                   |       | 0.30                               | %          | —                             |       | —                 |       | 0.00                               | %          | 52,150                          |       | 0.30                               | %          | March 2012                       |       |
| Energy                      |       | 165                                |       | (194,315                 | )          | -1.11                              | %          | (162                               | )          | 338,464                |       | 1.93                               | %          | 144,149                         |       | 0.82                               | %          | January 2012   - April 2012 |       |
| Metals                      |       | 366                                |       | (1,368,821               | )          | -7.79                              | %          | (357                               | )          | 624,297                |       | 3.55                               | %          | (744,524                        | )          | -4.24                              | %          | January 2012   - April 2012 |       |
|                        |       |                               |       |                     |       |                               |       |                               |       |                   |       |                               |       |                            |       |                               |       |                                  |       |
| Total,net                   |       |                               |       | $                        | (1,487,737 | )                                  | -8.47      | %                                  |       |                   | $          | 960,382                            |       | 5.47                            | %          | $                                  | (527,355   | )                                     | -3.00      | % |   |   |

 

No individual contract’s unrealized profit or loss comprised greater than 5% of Members’ Capital as of September 30, 2012 and December 31, 2011.

 

11

----

 

3.              FAIR VALUE OF INVESTMENTS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

----

 

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

 

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

 

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

 

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

 

The Master Fund’s net unrealized profit (loss) on open forward and futures contracts, by the above fair value hierarchy levels, as of September 30, 2012 and December 31, 2011 are as follows:

 
| **Net unrealized profit (loss) ** | ** ** | ** ** | ** ** | ** **       | ** ** | ** **        | ** ** | ** **         | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|--------------------|------------|
| **on open contracts**                       | ** ** | **Total**  | ** ** | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** ** |
| Futures                                               |       |       |       |             |       |              |       |               |       |
| Long                                                  |       | $          | 1,755,047  |             | $          | (378,924          | )          | $                  | 2,133,971  |   | $ | — |   |
| Short                                                 |       | (2,031,269 | )          | 319,653          |       | (2,350,922        | )          | —             |       |
|                                                  |       | (276,222   | )          | (59,271          | )          | (216,951          | )          | —             |       |
|                                                  |       |       |       |             |       |              |       |               |       |
| Forwards                                              |       |       |       |             |       |              |       |               |       |
| Long                                                  |       | —     |       | —           |       | —            |       | —             |       |
| Short                                                 |       | —     |       | —           |       | —            |       | —             |       |
|                                                  |       | —     |       | —           |       | —            |       | —             |       |
|                                                  |       |       |       |             |       |              |       |               |       |
| September 30, 2012                               |       | $          | (276,222   | )                | $          | (59,271           | )          | $                  | (216,951   | ) | $ | — |   |

 

13

----

 
| **Net unrealized profit (loss) ** | ** ** | ** ** | ** ** | ** **       | ** ** | ** **        | ** ** | ** **         | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|--------------------|------------|
| **on open contracts**                       | ** ** | **Total**  | ** ** | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** ** |
|                                                  |       |       |       |             |       |              |       |               |       |
| Futures                                               |       |       |       |             |       |              |       |               |       |
| Long                                                  |       | $          | (1,487,737 | )                | $          | (884,372          | )          | $                  | (603,365   | ) | $ | — |   |
| Short                                                 |       | 960,382    |       | 345,200          |       | 615,182           |       | —             |       |
|                                                  |       | (527,355   | )          | (539,172         | )          | 11,817            |       | —             |       |
|                                                  |       |       |       |             |       |              |       |               |       |
| Forwards                                              |       |       |       |             |       |              |       |               |       |
| Long                                                  |       | —     |       | —           |       | —            |       | —             |       |
| Short                                                 |       | —     |       | —           |       | —            |       | —             |       |
|                                                  |       | —     |       | —           |       | —            |       | —             |       |
|                                                  |       |       |       |             |       |              |       |               |       |
| December 31, 2011                                |       | $          | (527,355   | )                | $          | (539,172          | )          | $                  | 11,817     |   | $ | — |   |

 

The Master Fund’s volume of trading forwards and futures as of the nine month period ended September 30, 2012 and the period ended December 31, 2011, respectively, are representative of the activity throughout these periods. There were no transfers to or from any level during the three or nine month periods ended September 30, 2012.

 

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

 

The following table indicates the Master Fund’s trading profits and losses, before brokerage commissions, by commodity industry sector on derivative instruments for the three and nine month periods ended September 30, 2012:

 
| ** **                              | ** ** | **For the three months ended**      | ** ** | **For the nine months ended**       | ** ** |
|-----------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                              | ** ** | **September 30, 2012**                        | ** ** | **September 30, 2012**                        | ** ** |
| **Commodity Industry Sector** | ** ** | **profit (loss) from trading, net** | ** ** | **profit (loss) from trading, net** | ** ** |
|                                    |       |                                                    |       |                                                    |       |
| Agriculture                             |       | $                                                       | (2,304,050 | )                                                       | $          | (4,512,342 | ) |
| Currencies                              |       | 895,121                                                 |       | 1,239,469                                               |       |
| Energy                                  |       | 153,571                                                 |       | (371,041                                                | )          |
| Metals                                  |       | 1,388,544                                               |       | (336,976                                                | )          |
|                                    |       |                                                    |       |                                                    |       |
| Total, net                              |       | $                                                       | 133,186    |                                                    | $          | (3,980,890 | ) |

** **

The Master Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities.   Master Fund assets could be lost or impounded during lengthy bankruptcy proceedings.  Were a substantial portion of the Master Fund’s capital tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Master Fund 

 

14

----

 

to miss significant profit opportunities.  There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to “customer funds” deposited with regulated dealers and brokers.

 

4.              MARKET AND CREDIT RISKS

 

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

 

Market Risk

 

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

 

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

 

Credit Risk

 

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

 

The credit risk associated with these instruments from counterparty nonperformance is the net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition. The Master Fund attempts to mitigate this risk by dealing exclusively with BAC entities as clearing brokers.

 

The Master Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker.  Pursuant to the arrangements with MLPF&S (which each includes a netting arrangement), to the extent that such trading results in receivables from and payables to MLPF&S the receivables and payables are offset and reported as unrealized profit or loss on open futures contracts for MLPF&S and as unrealized profit or loss on the Statements of Financial Condition.

 

15

----

 

Indemnifications

 

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

 

5.              RELATED PARTY TRANSACTIONS

 

MLAI and the Fund have entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the “Registrar and Transfer Agent”), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Registrar and Transfer Agent performs the transfer agent and investor services functions for the Fund.  The agreement with the Registrar and Transfer Agent calls for a fee to be paid based on the collective net asset of funds managed or sponsored by MLAI with the minimum annual fee of $2,700,000. The fee rate ranges from 0.016% to 0.02% based on aggregate net assets.  MLAI allocates the Registrar and Transfer Agent fees to each of the managed/sponsored funds on a monthly basis based on the Fund’s net assets and the fee is payable monthly in arrears.  The Registrar and Transfer Agent fee, which ranged between 0.018% and 0.02% of aggregate asset level, allocated to the Fund for the three and nine months ended September 30, 2012 amounted to $1,299 and $3,645, respectively, of which $2,126 was payable to the Registrar and Transfer Agent as of September 30, 2012.

 

6.          SUBSEQUENT EVENTS

 

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

 

16

----

 

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

 

MONTH-END NET ASSET VALUE PER UNIT

 

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

 

The Fund calculates the Net Asset Value per unit of each class of units as of the close of business on the last business day of each calendar month and such other dates as MLAI may determine in its discretion. The Fund’s “Net Asset Value” as of any calculation date will generally equal the net asset value of the Fund’s investment in the Master Fund as of such date, plus any other assets held by the Fund, minus Sponsor’s, fees, organizational expense amortization and any operating costs and other liabilities of the Fund. MLAI is authorized to make all Net Asset Value determinations.

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **Aug.** | ** ** | **Sept.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|
| 2012       |       | $        | 0.9958     |     | $          | 1.0092   |       | $        | 1.0102     |    | $          | 1.0105   |       | $        | 0.8901     |     | $          | 0.8773    |       | $ | 0.9099 |   | $ | 0.9064 |   | $ | 0.8707 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |          |            |          |            |           |            |  |  |  |  |  |  |  |  |  |

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **Aug.** | ** ** | **Sept.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|
| 2012       |       | $        | 0.9934     |     | $          | 1.0059   |       | $        | 1.0061     |    | $          | 1.0055   |       | $        | 0.8850     |     | $          | 0.8715    |       | $ | 0.9031 |   | $ | 0.8990 |   | $ | 0.8628 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |          |            |          |            |           |            |  |  |  |  |  |  |  |  |  |

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **Aug.** | ** ** | **Sept.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|
| 2012       |       | $        | 1.0319     |     | $          | 1.0471   |       | $        | 1.0494     |    | $          | 1.0511   |       | $        | 0.9270     |     | $          | 0.9148    |       | $ | 0.9500 |   | $ | 0.9475 |   | $ | 0.9113 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |          |            |          |            |           |            |  |  |  |  |  |  |  |  |  |

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **Aug.** | ** ** | **Sept.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|
| 2012       |       | $        | 0.9969     |     | $          | 1.0106   |       | $        | 1.0120     |    | $          | 1.0126   |       | $        | 0.8923     |     | $          | 0.8797    |       | $ | 0.9127 |   | $ | 0.9095 |   | $ | 0.8739 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |          |            |          |            |           |            |  |  |  |  |  |  |  |  |  |

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS Z

 
|       |       |     |       |     |       |     |       |     |       |    |       |     |       |     |       |     |       |      |       |   |   |   |   |   |   |   |   |   |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **Aug.** | ** ** | **Sept.** | ** ** |
| 2012       |       | $        | 0.9996     |     | $          | 1.0142   |       | n/a      |       | n/a     |       | n/a      |       | n/a      |       | n/a      |       | n/a       |       | n/a    |   |

 

Liquidity and Capital Resources

 

The Fund does not engage in the sale of goods or services.  The Master Fund’s assets generally are its (i) equity in its trading accounts, consisting of cash (including restricted cash), and unrealized profit net of unrealized losses and (ii) interest receivable.    Because of the low margin deposits normally required in commodity futures trading relatively small price movements may result in substantial losses to the Fund.  While substantial losses could lead to a material decrease in liquidity, no such material losses occurred during the three or nine months ended September 30, 2012 and there was no impact on the Master Fund’s liquidity.

 

The Fund’s capital consists of the capital contributions of the members as increased or decreased by profits or losses on trading, expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

 

For the nine months ended September 30, 2012, Fund capital increased 128.07% from $17,499,262 to $39,910,961.  This increase was attributable to the net loss from operations of $3,189,642 coupled with the redemption of

 

17

----

 

14,239,284 Redeemable Units resulting in an outflow of $14,178,257.  The cash outflow was offset with cash inflow of $39,779,598 due to subscriptions of 41,418,800 Units.  Future redemptions could impact the amount of funds available for investment in commodity contract positions in subsequent months.

 

Critical Accounting Policies

 

Statement of Cash Flows

 

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

 

Investments

 

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

 

Cash and Cash Equivalents

 

The Fund considers all highly liquid investments, with a maturity of three months or less when acquired, to be cash equivalents. As of September 30, 2012 the Fund holds no cash equivalents. Cash was held at a nationally recognized financial institution.

 

Fair Value Measurements

 

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

 

Futures Contracts

 

The Master Fund trades exchange listed futures contracts.  A listed futures contract is a firm commitment to buy or sell a standardized quantity of an underlying asset over a specified duration.  The Master Fund buys and sells contracts based on indices of financial assets such as stocks, domestic and global stock indices, as well as contracts on various physical commodities. Prices paid or received on these contracts are determined by the ask or bid provided by the exchanges on which they are traded.   Contracts may be settled in physical form or cash settled depending upon the contract.  Upon the execution of a trade, margin requirements determine the amount of cash that must be on deposit to secure the transaction.  These amounts are considered restricted cash on the Master Fund’s Statements of Financial Condition.  Contracts are priced daily by the Master Fund and the profit or loss based on the daily mark to market are recorded as unrealized profits.  When the contract is closed, the Master Fund records a realized profit or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.  Because transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded, credit exposure is limited.  Realized profits (losses), net and changes in unrealized profits (losses), net on futures contracts are included in the Statements of Operations.  The Master Fund also trades futures contracts on the London Metals Exchange (LME).  The valuation pricing for LME contracts is based on action of a committee that incorporates prices from the most liquid trading sessions of the day and can also rely on other inputs such as supply and demand factors and bid and asks from open outcry sessions.

 

18

----

 

Forward Foreign Currency Contracts

 

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

 

Interest Rates and Income

 

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

 

Income Taxes

 

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

 

The Fund follows the ASC guidance on accounting for uncertainty in income taxes.  This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority.  Tax positions with respect to tax at the Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year.  MLAI has analyzed the Fund’s tax positions and has concluded that no provision for income tax is required in the Fund’s financial statements.

 

The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States — 2012.

 

Reform Act

 

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

 

19

----

 

Results of Operations

 

January 1, 2012 to June 30, 2012

 

*January 1, 2012 to March 31, 2012*

 

The Master Fund experienced a net trading profit of $3,409,843, in the first quarter of 2012. The Fund’s profits were attributable to the energy, metals, currencies and agriculture sectors posting profits.

 

The energy sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. Energy was a positive contributor on an absolute and relative basis as a result of short exposure to natural gas and long exposure to the energy products. Most of the energy products had positive performance for the month on strong global demand and escalating tensions with Iran. Warmer than expected weather in the U.S. and record gas volumes in storage put downward pressure on natural gas. Profits were posted to the Fund in the middle of the quarter. Energy was a positive contributor on an absolute and relative basis as a result of short exposure to natural gas and long exposure to the energy products. Most of the energy products had positive performance for the month on strong global demand and escalating tensions with Iran. Warmer than expected weather in the U.S. and record gas volumes in storage put downward pressure on natural gas. Profits were posted to the Fund at the end of the quarter.  The Funds short position in natural gas was a strong contributor while the long positions in the energy products were moderately positive. Warmer than expected weather in the U.S. and continued record gas volumes in storage put downward pressure on natural gas, as it fell during the month of March. Concerns related to the lack of storage capacity entering the summer months may have also contributed to the decline. Gasoline was up as refinery halts in the U.S. and Europe raised supply concerns as we approach the summer driving season.

 

The metals sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter as this sector had strong performance as aluminum, copper, zinc and nickel were all up for the month in response to positive economic data, including stronger than expected Chinese industrial production. Volatility in silver remained high as this commodity was up in January after declining in December. Losses were posted to the Fund in the middle of the quarter. Nickel was down on the month based on record production and with supply growth coming out of Brazil and Australia.  Silver profited, gold was down modestly and overall short exposure to the sector detracted from returns. Losses were posted to the Fund at the end of the quarter led by aluminum and nickel, based on expectations for slowing demand out of China. Silver and gold were both down. India’s government announced an increase in the gold-import tax which is expected to impact demand from one of the world’s biggest buyers. Losses were posted to the Fund at the end of the quarter.

 

The currency sector posted profits to the Fund. Profits were posted to the Fund at the beginning through the middle of the quarter as commodity currencies rallied. Losses were posted to the Fund at the end of the quarter as commodity currencies sold off during the month leading to the Fund’s negative performance.

 

The agriculture sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. Grains gave back some of the profits from December as the U.S. Department of Agriculture released slightly higher than expected inventories for most crops.  However, downward pressure was partially offset by concerns related to volatile weather in South America.  The Fund’s overweight corn/underweight wheat position detracted from performance as corn was slightly down and wheat was modestly up.  Performance of the Softs was mixed for the month. Profits in coffee, fell due to the outlook for increased inventories and production, were offset by losses in cocoa, which increased as stockpiles fell and dry weather in the Ivory Coast threatened output. Profits were posted to the Fund in the middle of the quarter. Soybeans and sugar were both up contributing to the sector’s positive performance. Dry weather in Argentina and Brazil reduced soybean supply expectations while the market continued to experience strong demand from China. Sugar was up on concerns that weather conditions will limit the rebuilding of production by major buyers including 

 

20

----

 

China and Indonesia. In a reversal from January, coffee was down as supply concerns eased on upwardly revised inventory figures in Brazil and expected production increases in Indonesia and Honduras. The overweight corn/underweight wheat position was positive as corn outperformed wheat.  Profits were posted to the Fund at the end of the quarter. Soybeans were up as dry weather in Argentina and Brazil reduced supply expectations. Cotton was up on news that India, the world’s second largest exporter, imposed a ban on cotton exports until September. Coffee was down on forecasts for a record crop out of Brazil. Performance for the Fund’s overweight corn / underweight wheat position was negative as corn underperformed wheat even as both commodities rallied at the end of the month following the U.S. Department of Agriculture’s Prospective Plantings report. Overall, the Fund’s positioning in the sector resulted in positive performance for the month.

 

*April 1, 2012 to June 30, 2012*

 

The Master Fund experienced a net trading loss of $7,523,918, in the second quarter of 2012. The Fund’s profits were attributable to the currency sector posting profits while the metals, agriculture, and energy sectors posted losses.

 

The currency sector posted profits to the Fund. Profits were posted to the Fund at the beginning and end of the quarter with losses in the middle of the quarter.

 

The metals sector posted losses to the Fund.  Losses were posted to the Fund at the beginning of the quarter. Industrial metals had mixed performance during the month of April.  Aluminum was down while lead and zinc were up. Zinc has been one of the best performing industrial metals year-to-date based on concerns that upcoming mine closures and lack of investment in new mines will leave the market undersupplied. Silver and gold was down which contributed to the sector’s negative performance.  Losses were posted to the Fund in the middle of the quarter. Precious metals were a negative contributor during the month of May as gold and silver were down.  While precious metals were not immune to the broad delevering that occurred during May, they maintained their value. Losses were posted to the Fund at the end of the quarter. The industrials metals sector generated negative performance in June as copper and nickel rallied, respectively.  The sector spent the majority of the month in negative territory due to concerns around global economic growth. Precious metals were a positive contributor as gold advanced and silver detracted marginally.

 

The agriculture sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter. Soybeans were up as drought conditions in South America continued to impact supply expectations. Losses were posted to the Fund in the middle of the quarter.  Agriculture detracted from May performance as soybeans fell given favorable weather reports in key growing areas in the Midwestern United States, which increased yield projections. The negative contribution of soybeans was partially offset by the trading program’s bearish positioning on corn, which was down in May due to expectations of a record harvest in the U.S. The trading program’s positioning within the softs led to mildly negative performance as cotton, coffee and sugar were down. Losses were posted to the Fund at the end of the quarter. The trading program’s bearish positioning in corn, based on expectations for the planting of record acreage, detracted and as the best performing commodity in June. The performance of corn reflected the expected impact of extreme weather in the U.S. during the critical pollination stage. The trading program’s bullish positioning in soybeans, up during the month of June, contributed to performance.  Despite abundant supplies, sugar and coffee rallied due to reports of below normal rainfall in India and unseasonably wet weather in Brazil.

 

The energy sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. The trading program’s bearish view on natural gas detracted from returns as the commodity rallied during the second half of the month of April on cooler than expected weather and evidence of potential production decreases. Gasoline fell on robust global production and signs that demand could be slowing. Losses were posted to the Fund in the middle of the quarter as natural gas rallied on news that U.S. power plants increased natural gas use due to switching from more traditional electric generation sources, such as coal.  Heating oil and gasoline fell in May on signs that demand could be slowing with weaker levels of economic activity.  The 

 

21

----

 

trading program’s short positioning in West Texas Intermediate crude oil, which was down partially offset negative performance from the trading program’s long positions in the energy products.  Losses were posted to the Fund at the end of the quarter. Energy detracted in June as natural gas rallied despite continued elevated inventory levels, partly in response to fears that Tropical Storm Debby would impact natural gas production as it approached coastal Florida in late June.  The trading program’s short positioning in West Texas Intermediate crude oil, which was down in June, partially offset negative performance.  Despite the reversal of the Seaway pipeline, West Texas Intermediate crude oil remains well supplied benefiting from increases in production and weakening demand. Brent crude and West Texas Intermediate crude oil were down significantly for the majority of June, but, rallied on the last trading day of the month on the stronger than expected news out of Europe, renewed fears of escalating tensions with Iran and oil industry labor strikes in Norway.

 

*July 1, 2012 to September 30, 2012*

 

The Master Fund experienced a net trading profit of $133,186 in the third quarter of 2012. The Fund’s profits were attributable to the metals, currency and energy sector posting profits while agriculture sector posted losses.

 

The metals sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. Mildly positive performance in the industrial metals sector was a result of the trading program’s overall bearish positioning within the sector.  Most metals in the sector traded in-line with expectations for slowing demand from China.  Nickel experienced the largest sell-off during the month of July as a result of ample supply levels and weak demand. Precious metals posted profits to the Fund as gold and silver were up during the month of July. Profits were posted to the Fund in the middle of the quarter.  The trading program maintained small position sizes across the industrial metals but was overall short the sector.  Performance for the individual metals was muted during August with the headwinds out of China, Europe and the U.S. overshadowing the longer-term bullish prospects for certain industrial metals.  Gold and silver were up due to expectations for continued easing of monetary policy globally. Profits were posted to the Fund at the end of the quarter. The industrial metals sector rallied primarily in response to the U.S. Federal Reserve’s announcement for additional quantitative easing, and was the largest contributor to broad market performance. The precious metals sector also appeared to benefit from the announcement of QE3 and expectations for interest rates in the U.S. to remain low for the near term. Silver and gold were up in September.

 

The currency sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter as the commodity currencies were up during the month of July only to be reversed in the middle of the quarter. The performance of commodity currencies was the primary driver of negative performance resulting in losses posted to the Fund in the middle of the quarter.  Profits were posted to the Fund at the end of the quarter due to the trading program’s positioning.

 

The energy sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. Energy detracted slightly in July as each commodity in the sector was up during the month. Natural gas continued the rally which began in mid-April as strong performance was influenced by increased use for electricity generation, production cuts as a result of low prices and de-risking/delevering.  Warm weather during July added further pressure as increased air conditioning use led to elevated demand for electricity. The trading program’s short positioning in West Texas Intermediate crude oil was up during July which detracted from performance.  West Texas Intermediate crude oil advanced as it was supported by increased U.S. led sanctions against Iran and production problems in the North Sea Buzzard Oilfield.  Gasoline rallied during the month of July partly due to unexpected refinery closure. Profits were posted to the Fund in the middle of the quarter. Positioning across the energy sector was a moderate contributor as the trading program’s long positions in the energy products, gasoline and heating oil, added value while bearish positioning in West Texas Intermediate crude oil detracted.  All of the commodities in the energy sector rallied, with the exception of natural gas, due to the impact of the sanctions against Iran and production cuts ahead of Hurricane Isaac’s arrival in the Gulf of Mexico.   Gasoline, heating oil, Brent crude and West Texas Intermediate crude oil 

 

22

----

 

rallied. Losses were posted to the Fund at the end of the quarter.  The trading program’s short position in natural gas, reflecting continued high inventory levels, negatively impacted performance as the commodity rallied during the month of September. The trading program’s bearish positioning in West Texas Intermediate crude oil contributed to performance as it fell during the month of September driven, in part, by concerns over global economic growth and reports of OPEC increasing production to stabilize prices at approximately $100 a barrel.

 

The agriculture sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter. The trading program’s positioning within the agriculture sector generated strong performance as the Midwestern U.S. continued to experience severe heat and drought conditions throughout July.  By the end of the month, approximately half of the U.S. corn crop was rated poor/very poor by the U.S. Department of Agriculture.  As a result, corn experienced another large price increase. Soybeans were up modestly less than corn, as there was a possibility of the crop recovering with an improvement in weather conditions. Volatility was higher in the grains sector, which also contributed to the trading program’s lower exposure. Profits were posted to the Fund in the middle of the quarter. For the grains sector, the trading program’s bullish positioning across the soybean complex was a positive contributor to returns.  Soybeans were up due to the continued impact of extreme heat and drought conditions in key growing areas of the Midwestern U.S.  Prior to the emergence of poor weather conditions in June, soybean supplies were already tight due to production issues in South America earlier in the year.  Corn and wheat, were each approximately flat during the month of August as the condition of both crops was already poor and did not significantly deteriorate further. The trading program’s overweight position in sugar detracted as the commodity fell during the month of August due to improved weather conditions in Brazil, which supported the cane crushing process.  A delayed monsoon in India and heavy rains in Brazil impacted expectations for the current crop. The trading program’s bearish positioning in cotton also detracted from performance.  Despite ample supplies of cotton, the potential impact of Hurricane Isaac, perceived carryover effects from the heat wave in the Midwestern U.S. and reports of stockpiling in China caused cotton to rally.  The Fund’s bearish positioning in coffee added value as the commodity fell.  Supportive weather in Brazil put pressure on already ample supply levels. Losses were posted to the Fund at the end of the quarter. The trading program’s bullish positioning within the grains was the primary detractor from performance as soybeans and corn were down in September.  Despite historically tight inventory levels, both commodities fell on news of supportive growing conditions in Brazil and a less bearish than expected supply report released by the U.S. Department of Agriculture.    The trading program’s positioning within the softs generated slightly positive performance with gains from the bearish positioning in cotton offset by mild losses in both cocoa and coffee.  Cotton fell during the month of September, reversing the rally which took place in August, primarily on expectations for increasing inventories and weakening demand.

 

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

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Introduction

 

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

 

Market movements result in frequent changes in the fair market value of the Master Fund’s open positions and, consequently, in its earnings and cash flow. The Master Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value 

 

23

----

 

of financial instruments and contracts, the diversification effects among the Master Fund’s open positions and the liquidity of the markets in which it trades.

 

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

 

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

 

Quantifying The Fund’s Trading Value At Risk

 

Quantitative Forward-Looking Statements

 

The following quantitative disclosures regarding the Fund’s market risk, through the Master Fund exposures contain “forward-looking statement” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

 

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

 

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

 

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

 

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

 

24

----

 

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

 

The following table indicates the average, highest and lowest trading Value at Risk associated with the Master Fund’s open positions by market category for the fiscal period. For the nine months ended September 30, 2012 the Master Fund’s average Month-end Net Asset Value was approximately $50,535,195.

 

**September 30, 2012**

 
| ** **               | ** ** | **Average Value** | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **at Risk**       | ** ** | **Capitalization**         | ** ** | **at Risk**       | ** ** | **at Risk**      | ** ** |
|                     |       |                   |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                      | 1,427,017  |                       | 2.82       | %                      | $          | 2,591,255             |       | $ | 590,467 |   |
| Currencies               |       | 874,973                |       | 1.73                       | %          | 1,517,976              |       | 446,850               |       |
| Energy                   |       | 1,134,105              |       | 2.24                       | %          | 2,055,566              |       | 377,075               |       |
| Metals                   |       | 1,477,422              |       | 2.92                       | %          | 2,102,338              |       | 997,530               |       |
|                     |       |                   |       |                       |       |                   |       |                  |       |
| Total                    |       | $                      | 4,913,517  |                       | 9.71       | %                      | $          | 8,267,135             |       | $ | 2,411,922 |   |

 

 

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

 

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

 

Non-Trading Risk

 

Foreign Currency Balances; Cash on Deposit with MLPF&S

 

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

 

The Master Fund also has non-trading market risk on the approximately 90%-95% of its assets which are held in cash at MLPF&S. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.

 

25

----

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding the Master Fund’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Master Fund’s primary market risk exposures as well as the strategies used and to be used by MLAI and HCM for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Master Fund’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Master Fund. There can be no assurance that the Master Fund’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of the value of their investment in the Fund.

 

The following were the primary trading risk exposures of the Master Fund as of September 30, 2012, by market sector.

 

Interest Rates

 

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

 

Metals

 

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

 

Agricultural Commodities

 

The Master Fund’s primary agricultural commodities exposure is to agricultural price movements which are often directly affected by severe or unexpected weather conditions. Soybeans, grains, livestock and corn accounted for the substantial bulk of the Master Fund’s agricultural commodities exposure as of September 30, 2012.

 

Energy

 

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

 

26

----

 

Qualitative Disclosures Regarding Non-Trading Risk Exposure

 

The following were the only non-trading risk exposures of the Master Fund as of September 30, 2012.

 

U.S. Dollar Cash Balance

 

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

 

The Master Fund also holds U.S. dollars in cash at the Bank of New York, which is in a non-interest bearing account to avail of the unlimited insurance coverage for bank deposits through December 31, 2012.

 

Item 4. Controls and Procedures

 

MLAI, the Sponsor of Highbridge Commodities FuturesAccess LLC, with the participation of the Sponsor’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934) with respect to the Fund as of the end of the period covered by this quarterly report, and, based on this evaluation, has concluded that these disclosure controls and procedures are effective.  No change in internal control over financial reporting (in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934) occurred during the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.                                 Legal Proceedings

 

None.

 

Item 1A.  Risk Factors

 

There are no material changes from risk factors as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on March 23, 2012.

 

27

----

 

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

 

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

 

CLASS A

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-12     |       | $                | 1,395,668  |       | 1,487,126  |   | $ | 0.9385 |   |
| Feb-12     |       | 483,671          |       | 485,711    |       | 0.9958 |   |
| Mar-12     |       | 2,829,093        |       | 2,803,303  |       | 1.0092 |   |
| Apr-12     |       | 2,198,525        |       | 2,176,327  |       | 1.0102 |   |
| May-12     |       | 1,325,524        |       | 1,311,751  |       | 1.0105 |   |
| Jun-12     |       | 1,265,767        |       | 1,422,049  |       | 0.8901 |   |
| Jul-12     |       | 968,120          |       | 1,103,522  |       | 0.8773 |   |
| Aug-12     |       | 373,833          |       | 410,851    |       | 0.9099 |   |
| Sep-12     |       | 125,775          |       | 138,763    |       | 0.9064 |   |
| Oct-12     |       | 268,958          |       | 308,898    |       | 0.8707 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS C

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-12     |       | $                | 1,544,195  |       | 1,648,020  |   | $ | 0.9370 |   |
| Feb-12     |       | 1,313,310        |       | 1,322,035  |       | 0.9934 |   |
| Mar-12     |       | 3,816,678        |       | 3,794,293  |       | 1.0059 |   |
| Apr-12     |       | 2,523,183        |       | 2,507,885  |       | 1.0061 |   |
| May-12     |       | 2,043,962        |       | 2,032,781  |       | 1.0055 |   |
| Jun-12     |       | 1,712,314        |       | 1,934,819  |       | 0.8850 |   |
| Jul-12     |       | 2,358,954        |       | 2,706,775  |       | 0.8715 |   |
| Aug-12     |       | 2,465,480        |       | 2,730,019  |       | 0.9031 |   |
| Sep-12     |       | 1,163,196        |       | 1,293,876  |       | 0.8990 |   |
| Oct-12     |       | 430,125          |       | 498,522    |       | 0.8628 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS D

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-12     |       | $                | 1,000,000  |       | 1,029,548  |   | $ | 0.9713 |   |
| Feb-12     |       | 1,000,000        |       | 969,086    |       | 1.0319 |   |
| Mar-12     |       | —           |       | —     |       | 1.0471 |   |
| Apr-12     |       | —           |       | —     |       | 1.0494 |   |
| May-12     |       | 1,175,000        |       | 1,117,877  |       | 1.0511 |   |
| Jun-12     |       | —           |       | —     |       | 0.9270 |   |
| Jul-12     |       | 553,957          |       | 605,550    |       | 0.9148 |   |
| Aug-12     |       | —           |       | —     |       | 0.9500 |   |
| Sep-12     |       | 300,000          |       | 316,622    |       | 0.9475 |   |
| Oct-12     |       | 766,000          |       | 840,557    |       | 0.9113 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS I

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-12     |       | $                | 1,219,448  |       | 1,298,390  |   | $ | 0.9392 |   |
| Feb-12     |       | —           |       | —     |       | 0.9969 |   |
| Mar-12     |       | 1,080,000        |       | 1,068,672  |       | 1.0106 |   |
| Apr-12     |       | 453,750          |       | 448,370    |       | 1.0120 |   |
| May-12     |       | 1,338,315        |       | 1,321,662  |       | 1.0126 |   |
| Jun-12     |       | —           |       | —     |       | 0.8923 |   |
| Jul-12     |       | 257,598          |       | 292,825    |       | 0.8797 |   |
| Aug-12     |       | 695,000          |       | 761,477    |       | 0.9127 |   |
| Sep-12     |       | 799,282          |       | 878,815    |       | 0.9095 |   |
| Oct-12     |       | 165,000          |       | 188,809    |       | 0.8739 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS Z

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-12     |       | $                | —     |       | —     |   | $ | 0.9409 |   |
| Feb-12     |       | —           |       | —     |       | 0.9996 |   |
| Mar-12     |       | —           |       | —     |       | 1.0142 |   |
| Apr-12     |       | —           |       | —     |       | — |   |
| May-12     |       | —           |       | —     |       | — |   |
| Jun-12     |       | —           |       | —     |       | — |   |
| Jul-12     |       | —           |       | —     |       | — |   |
| Aug-12     |       | —           |       | —     |       | — |   |
| Sep-12     |       | —           |       | —     |       | — |   |
| Oct-12     |       | —           |       | —     |       | — |   |
|            |            |                  |            |            |            |  |  |  |  |

 

----

(1) Beginning of the month Net Asset Value

 

Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%.  Class D and Class I Units are subject to sales commissions paid to MLPF&S up to 0.5%.  The rate assessed to a given 

 

28

----

 

subscription is based upon the subscription amount.  Sales commissions are directly deducted from subscription amounts.  Class C, Class DS, Class DT and Class Z Units are not subject to any sales commissions.

 

(b) Not applicable.

(c) Not applicable.

 

Item 3.                                 Defaults Upon Senior Securities

 

None.

 

Item 4.                                 Mine Safety Disclosures

 

Not applicable.

 

Item 5.                                 Other Information

 

None.

 

Item 6.                                 Exhibits

 

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

 

31.01 and

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

 

Exhibit 31.01

and 31.02:             Are filed herewith.

 

32.01 and

32.02                                         Section 1350 Certifications

 

Exhibit 32.01

and 32.02                 Are filed herewith.

 

Exhibit 101   Are filed herewith.

 

The following materials from the Fund’s quarterly Report on Form 10-Q for the three and nine month periods ended September 30, 2012 formatted in XBRL (Extensible Business Reporting Language): ( i ) Statements of Financial Condition (ii) Statement of Operations (iii) Statements of  Changes in Members’ Capital (iv) Financial Data Highlights and (v) Notes to Financial Statements, tagged as blocks of text. (1)

 

----

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

 

29

----

 

**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.

 

HIGHBRIDGE COMMODITIES FUTURESACCESS LLC

 

 
|                           | By:    | MERRILL   LYNCH ALTERNATIVE                    |
|--------------------------------|--------|------------------------------------------------|
|                           |   | INVESTMENTS   LLC                              |
|                           |   | (Manager)                                      |
|                           |   |                                           |
|                           |   |                                           |
| Date:   November 14, 2012 | By:    | /s/   DEANN MORGAN                             |
|                           |   | Deann   Morgan                                 |
|                           |   | Chief   Executive Officer and President        |
|                           |   | (Principal   Executive Officer)                |
|                           |   |                                           |
|                           |   |                                           |
| Date:   November 14, 2012 | By:    | /s/   BARBRA E. KOCSIS                         |
|                           |   | Barbra   E. Kocsis                             |
|                           |   | Chief   Financial Officer                      |
|                           |   | (Principal   Financial and Accounting Officer) |

 

30

----