News Column

KMP FUTURES FUND I LLC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 13, 2014

This report on Form 10-Q (the "Report") for the quarter ending June 30, 2014 ("Second Quarter 2014") includes forward-looking statements that reflect the current expectations of Kenmar Preferred Investments, LLC, the managing member of KMP Futures Fund I LLC, about the future results, performance, prospects and opportunities of the Registrant. The managing member has tried to identify these forward-looking statements by using words such as "may", "will", "expect", "anticipate", "believe", "intend", "should", "estimate" or the negative of those terms or similar expressions. These forward-looking statements are based on information currently available to the managing member and are subject to a number of risks, uncertainties and other factors, both known, such as those described in this Report, and unknown, that could cause the Registrant's actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, the managing member undertakes no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.

Introduction General



KMP Futures Fund I LLC (the "Registrant") is a limited liability company organized under the laws of Delaware on November 20, 2006 which commenced operations on January 1, 2007. The Registrant will terminate on December 31, 2056 unless terminated sooner under the provisions of the limited liability company agreement of the Registrant (the "Operating Agreement"). The Registrant was formed to engage in the direct or indirect speculative trading of a diversified portfolio of futures contracts, options on futures contracts and forward currency contracts and may, from time to time, engage in cash and spot transactions. Investors holding interests in the Registrant are collectively referred to herein as the "Members" or the "Individual Members". The fiscal year end of the Registrant is December 31.

Effective November 12, 2009, the Registrant became a reporting company pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Moreover, as a commodity pool, the Registrant became subject to the record keeping and reporting requirements of the Commodity Futures Trading Commission ("CFTC") and the National Futures Association ("NFA").

The Registrant's Objectives



The Registrant's objectives are:

Significant profits over time; Performance volatility commensurate with profit potential; Controlled risk of loss; and Diversification within a traditional portfolio, typically consisting entirely of "long" equity and debt positions and reduced dependence on a single nation's economy, by accessing global financial, commodity and other non-financial futures markets.



The Registrant's potential for aggressive capital growth arises from the profit possibilities offered by the global futures, forward and options markets and the skills of the professional trading organization(s) selected to manage the assets of the Registrant. The fact that the Registrant can profit from both rising and falling markets adds an element of profit potential that is not present in long-only strategies. However, the Registrant can also incur losses from both rising and falling markets that adds to the risk of loss. In addition to its profit potential and risk of loss, the Registrant also could help reduce the overall volatility, or risk, of a portfolio. By investing in markets that operate independently from U.S. stock and bond markets (and therefore, may be considered as non-correlated), the Registrant may provide positive returns even when U.S. stock and bond markets are experiencing flat to negative performance and may provide negative returns even when U.S. stock and bond markets are experiencing flat to positive performance. Non-correlation should not be confused with negative correlation, where the performance would be exactly opposite between the Registrant and U.S. stock and bond markets.

The managing member makes no guarantee that the investment objectives for the Registrant will be achieved.

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Past performance is not necessarily indicative of future results.

Managing Member and its Affiliates

Effective March 17, 2014, Kenmar Preferred Investments, L.P. changed its name and form of entity to Kenmar Preferred Investments, LLC ("Kenmar Preferred" or the "Managing Member"). Kenmar Preferred or Managing Member refers to either Kenmar Preferred Investments, L.P. or Kenmar Preferred Investments, LLC depending on the applicable period discussed. Kenmar Preferred is the managing member of the Registrant, and has administrative authority over the operations of the Registrant.

The Managing Member's predecessor and affiliates have been sponsoring and managing single and multi-advisor funds for over two decades. Effective April 1, 2014, the principal office of the Registrant is c/o Kenmar Preferred Investments, LLC, 1211 Avenue of the Americas, Suite 2701, New York, New York 10036. Prior to April 1, 2014, the principal office of the Registrant was 900 King Street, Suite 100, Rye Brook, New York 10573. The telephone number of the Registrant and the Managing Member is (914) 307-7000.

The Managing Member has substantial experience in selecting and monitoring trading advisors, asset allocation and overall portfolio design using quantitative and qualitative methods.

The Managing Member monitors the trading activity and performance of the trading advisors and adjusts the overall leverage at which the Registrant trades. The commitment of the Registrant to the trading advisors may exceed 100% of the Registrant's total equity if the Managing Member decides to strategically allocate notional equity to such trading advisors. This may result in increased profits or larger losses than would otherwise result. There likely will be periods in the markets during which it is unlikely that the trading advisors will be profitable. By having the ability to deleverage the Registrant's market commitment to below its actual equity during such periods, the Managing Member could help preserve capital while awaiting more favorable market cycles.

The Managing Member also performs ongoing due diligence with respect to the trading advisors. If the Managing Member determines that the trading advisors have departed from its program or stated trading methodology or has exceeded its stated risk parameters, the Managing Member, on behalf of the Registrant, will take such actions as it deems appropriate, which may include terminating the trading advisors. Similarly, if the Managing Member's ongoing due diligence leads the Managing Member to determine that it is in the best interests of the Registrant to add an additional trading advisor; it will do so in its sole discretion. If the Managing Member concludes, based upon its perception of market or economic conditions, that it is appropriate to allocate assets of the Registrant to a different trading program run by the trading advisors, it will do so. The Managing Member may select a replacement if any of the trading advisors resign or are terminated, or may select additional trading advisors at its discretion.

The Trading Advisors



The Registrant allocates its net assets ("Allocated Assets") to commodity trading advisors (each, a "Trading Advisor" and collectively, the "Trading Advisors"). Each Trading Advisor manages the portion of the assets of the Registrant allocated to such Trading Advisor and makes the trading decisions in respect of the assets allocated to such Trading Advisor. The Managing Member may terminate any current Trading Advisor or select new trading advisors from time to time in its sole discretion. In the future, the Managing Member may determine to access certain Trading Advisors through separate investee pools.

In general, the Registrant expects to access the Trading Advisors through various series of CTA Choice Fund LLC ("CTA Choice"). CTA Choice is an "umbrella fund" having multiple segregated series, each of which is referred to herein as a "CTA Fund" or an "Affiliated Investment Fund". Each CTA Fund has its own clearly-defined investment objective and strategies that are implemented by a Trading Advisor. Effective March 17, 2014, ClariTy Managed Account & Analytics Platform, L.P. changed its name and form of entity to ClariTy Managed Account & Analytics Platform, LLC ("ClariTy"). ClariTy refers to either ClariTy Managed Account & Analytics Platform, L.P. or ClariTy Managed Account & Analytics Platform, LLC, depending on the applicable period discussed. ClariTy, an affiliate of Kenmar Preferred, serves as the managing member for CTA Choice. The Registrant allocates approximately one-half of its Allocated Assets to each of the following CTA Funds:

CTA Choice WTN, managed by Winton Capital Management Limited ("Winton"), pursuant to its Diversified Program, which is a systematic, technical diversified program; and CTA Choice EGLG, managed by Eagle Trading Systems Inc. ("Eagle"), pursuant to its Global Program, which is a systematic, technical long term diversified program. 21



Winton's Diversified Program employs a computer-based system to engage in the speculative trading of approximately 120 international futures, options and forwards markets, government securities such as bonds, as well as certain over the counter ("OTC") instruments, which may include foreign exchange and interest rate forward contracts and swaps. Winton seeks to combine highly liquid financial instruments offering positive but low Sharpe ratios (meaning that profits have been achieved with a certain level of risk) and generally low correlation over the long term to other markets such as equities and fixed income.

Eagle's Global Program is a technical, trend-following system developed, based on Eagle's extensive experience in observing and trading the global markets, to capture a well-structured trading philosophy. The trading philosophy incorporates trend following elements, money management principles, predetermined risk parameters and volatility adjustment features. The system is designed to trade in a wide range of global futures markets - currencies, fixed income, energies, commodities and stock indices - that exhibit orderly intermediate and long-term trends, and adjust to changes in market environment with no predetermined allocation to any one sector. Eagle analyzes typical behavior and volatility patterns of various markets. The system seeks markets with potentially good risk/reward profiles while attempting to avoid markets characterized by excessive volatility and sharp price corrections. An attempt is made to participate in markets which exhibit favorable "signal to noise" characteristics. Money management and risk control disciplines serve to attempt to limit downside risk.

The Administrator



GlobeOp Financial Services LLC ("GlobeOp" or the "Administrator"), a Delaware limited liability company located at One South Road, Harrison, NY 10528, has been retained by the Registrant to serve as the Registrant's administrator and provide certain administration and accounting services.

The Administrator performs or supervises the performance of services necessary for the operation and administration of the Registrant (other than making investment decisions), including administrative and accounting services. The Administrator also calculates the Registrant's Net Asset Value. In addition, the Administrator maintains certain books and records of the Registrant, including certain books and records required by CFTC Rule 4.23(a).

Fees and Expenses Management Fee



The Registrant pays to the Managing Member in advance a monthly management fee equal to 1/12th of 6.00% (6.00% per annum) of the Net Asset Value (defined below) of the Registrant as of the beginning of the month, See Note 4 of the Registrant's financial statements included in its annual report for the year ended December 31, 2013 (the " Registrant's 2013 Annual Report"), which is filed as an exhibit to the Registrant's Form 10-K for the fiscal year ended December 31, 2013.

"Net Asset Value" is the total assets of the Registrant less total liabilities of the Registrant, each determined on the basis of accounting principles generally accepted in the United States of America.

The Registrant, through its investment in Affiliated Investment Funds, indirectly pays a monthly administrative services fee in the amount of 1/12 of 0.25% (0.25% annually) of the respective CTA Fund's beginning of month Allocated Assets to ClariTy for risk management and related services with respect to monitoring the Trading Advisors.

Trading Advisors' Fees



The Registrant indirectly pays Winton and Eagle monthly management fees at an annual rate of 1.5% and 2%, respectively, as defined in their respective Trading Advisory Agreements.

The Registrant indirectly pays Winton and Eagle an incentive fee accrued monthly and paid quarterly of 20% and 25%, respectively, for achieving "New High Net Trading Profits" as defined below.

New High Net Trading Profits (for purposes of calculating an Trading Advisor's incentive fees) and paid as of the close of business of the last day of each calendar quarter (the "Incentive Measurement Date") and will include such profits (as outlined below) since the immediately preceding Incentive Measurement Date (or, with respect to the first Incentive Measurement Date, since commencement of operations of the Registrant or the date the Trading Advisor commenced trading activities for the Registrant), or each an Incentive Measurement Period. New High Net Trading Profits for any Incentive Measurement Period will be the net profits, if any, from the Trading Advisor's trading during such period (including (i) realized trading profit (loss) plus or minus (ii) the change in unrealized trading profit (loss) on open positions), and will be calculated after the determination of certain transaction costs attributable to the Trading Advisor's trading activities and the Trading Advisor's management fee, but before deduction of any incentive fees payable during the Incentive Measurement Period. New High Net Trading Profits will not include interest earned or credited on the assets allocated to the Trading Advisor.

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New High Net Trading Profits will be generated only to the extent that the cumulative New High Net Trading Profits achieved by the Trading Advisor exceed the highest level of cumulative New High Net Trading Profits achieved by such Trading Advisor as of a previous Incentive Measurement Date. Except as set forth below, net losses from prior quarters must be recouped before New High Net Trading Profits can again be generated.

If a withdrawal or distribution occurs or if a Trading Advisor's advisory agreement with the relevant CTA Fund is terminated at any date that is not an Incentive Measurement Date, the date of the withdrawal or distribution or termination will be treated as if it were an Incentive Measurement Date. New High Net Trading Profits for an Incentive Measurement Period shall exclude capital contributions allocated to the Trading Advisor in an Incentive Measurement Period, distributions or redemptions paid or payable from the Trading Advisor's account during an Incentive Measurement Period and any loss carry-forward attributable to the Trading Advisor will be reduced in the same proportion that the value of the assets allocated away from the Trading Advisor comprises of the value of the assets allocated to the Trading Advisor prior to such allocation away from the Trading Advisor. In calculating New High Net Trading Profits, incentive fees paid for a previous Incentive Measurement Period will not reduce cumulative New High Net Trading Profits in subsequent periods.

Brokerage Commissions and Fees

The Registrant indirectly pays to the clearing brokers all brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with the Registrant's trading activities. These activities are charged indirectly through the Registrant's Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds. On average, total charges paid to the clearing brokers are expected to be less than $10.00 per round-turn trade, although the clearing broker's brokerage commissions and trading fees will be determined on a contract-by-contract basis. The exact amount of such brokerage commissions and trading fees to be incurred is impossible to estimate and will vary based upon a number of factors including the trading frequency of each Trading Advisor, the types of instruments traded, transaction sizes, degree of leverage employed and transaction rates in effect from time to time.

Routine Operational, Administrative and Other Ordinary Expenses

The Registrant pays directly or indirectly all of its routine operational, administrative and other ordinary expenses, including, but not limited to, (i) legal, bookkeeping, accounting, custodial, administration (including, without limitation, the costs and expenses of the Administrator), auditing, tax preparation charges and related charges of the Registrant (including reimbursement of the Managing Member on a reasonable time-spent basis, for certain legal, accounting, administrative and registrar and transfer agent work performed by certain of the Managing Member's personnel for and on behalf of the Registrant), as well as printing and other related expenses, (ii) investment related expenses, including, but not limited to brokerage commissions, "bid-ask" spreads, mark-ups, margin interest and other transactional charges and clearing fees, as well as banking, sales and purchase commissions and charges and exchange fees, fees and charges of other custodians and clearing agencies, interest and commitment fees on loans and debit balances, income taxes, withholding taxes, transfer taxes and other governmental charges and duties, and other transactional charges and clearing fees incurred by the Trading Advisor on behalf of the Registrant, the Registrant's pro rata share of the expenses of any Affiliated Investment Fund into which it invests, and any due diligence expenses incurred in selecting and monitoring the Trading Advisor and any Affiliated Investment Fund, (iii) operational and overhead expenses of the Registrant, including but not limited to, photocopying, postage, and telephone expenses, (iv) preparation of monthly, quarterly, annual and other reports required by applicable Federal and state regulatory authorities, (v) the Registrant's meetings and preparing, printing and mailing of proxy statements and reports to Members, (vi) client relations and services, and (vii) computer equipment, system maintenance and other technology-related expenses.

Extraordinary Fees and Expenses

The Registrant pays all its extraordinary fees and expenses, if any, and its allocable portion of all extraordinary fees and expenses of the Registrant generally, if any, as determined by the Managing Member. Extraordinary fees and expenses are fees and expenses that are non-recurring and unusual in nature, such as legal claims and liabilities and litigation costs and any permitted indemnification payments related thereto. Extraordinary fees and expenses shall also include material expenses that are not currently anticipated obligations of the Registrant or of managed futures funds in general, such as the payment of partnership taxes or governmental fees associated with payment of such taxes. Routine operational, administrative and other ordinary expenses will not be deemed extraordinary expenses. Any fees and expenses imposed on the Registrant due to the status of an individual shall be paid by such individual or the Registrant, not the Managing Member.

23 Expense Cap



Routine operational, administrative and other ordinary expenses, other than the Managing Member's management fee, the fees to be paid to the Registrant's Trading Advisor(s), Brokerage Commissions and extraordinary fees and expenses, are limited to 1.50% of average Net Asset Value per annum, See Note 3 of the Registrant's 2013 Annual Report, which is filed as an exhibit to the Registrant's Form 10-K for the fiscal year ended December 31, 2013. In the event fees and expenses for such items exceed such amount, the Managing Member will pay such amounts.

Redemption Charge



There is no redemption charge in respect of interests.

Competition



The Registrant competes with other private and publicly offered commodity pools, as well as other alternative investments such as REITs and oil and gas limited partnerships and hedge funds. The Registrant operates in a competitive environment in which it faces several forms of competition, including, without limitation:

The Registrant competes with other commodity pools and other investment vehicles for Members. The Trading Advisor may compete with other traders in the markets in establishing or liquidating positions on behalf of the Registrant. Employees



The Registrant has no employees. Management and administrative services for the Registrant are performed by the Managing Member or third parties pursuant to the LLC Operating Agreement, as further discussed in Notes 3 and 4 of the Registrant's 2013 Annual Report, which is filed as an exhibit to the Registrant's Form 10-K for the fiscal year ended December 31, 2013.

Financial Information about Segments

The Registrant's business constitutes only one segment for financial reporting purposes. The Registrant does not engage in the production or sale of any goods or services. The objective of the Registrant's business is appreciation of its assets through speculative trading in such commodity interests. Financial information about the Registrant's business, as of June 30, 2014, is set forth under Items 2 and 3 herein.

Financial Information about Geographic Areas

Although the Registrant has indirect exposure to the global futures, forward and option markets, it does not have operations outside of the United States.

Available Information



Effective with the Form 10 filed on November 2, 2009, the Registrant files an annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports with the SEC. You may read and copy any document filed by the Registrant at the SEC'sPublic Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information on the Public Reference Room. The Registrant does not maintain an internet website; however, the Registrant's SEC filings are available to the public from the EDGAR database on the SEC's website at http://www.sec.gov. The Registrant's CIK number is 0001474307.

Critical Accounting Policies General 24



Preparation of the condensed financial statements and related disclosures in compliance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires the application of appropriate accounting rules and guidance. Applying these policies requires the Managing Member to make judgments, estimates and assumptions in connection with the preparation of the Registrant's condensed financial statements. Actual results may differ from the estimates used.

The Managing Member has evaluated the Registrant's condensed financial statements and related disclosures and has determined that the policies discussed below are critical accounting policies because they involve estimates, judgments and assumptions that are particularly complex, subjective or uncertain. For further discussion of the Registrant's significant accounting policies, see Note 2 of the Registrant's 2013 Annual Report, which is filed as an exhibit to the Registrant's Form 10-K for the fiscal year ended December 31, 2013.

The Registrant records all investments at fair value in its condensed financial statements, with changes in fair value reported on the condensed statements of operations. Generally, fair values are based on quoted market prices; however, in certain circumstances, significant judgments and estimates are involved in determining fair value in the absence of an active market closing price. The Registrant considers its investments in publicly-traded mutual funds, to be based on quoted prices in active markets for identical assets (Level 1). Level 3 inputs reflect the Registrant's assumptions that it believes market participants would use in pricing the asset or liability. The Registrant develops Level 3 inputs based on the best information available in the circumstances, which may include indirect correlation to a market value, combinations of market values or the Registrant's proprietary data. Level 3 inputs generally include information derived through extrapolation or interpolation of observable market data. The Registrant does not currently have any investments valued using Level 3 inputs.

The investment in Affiliated Investment Funds is reported in the Registrant's condensed statements of financial condition and is considered a Level 2 investment. In determining the level, the Registrant considers the length of time until the investment is redeemable, including notice and lock-up periods or any other restriction on the disposition of the investment. The Registrant also considers the nature of the portfolios of the underlying Affiliated Investment Funds and their ability to liquidate their underlying investments. The Registrant has the ability to redeem its investments at the reported net asset valuation as of the measurement date (see Note 7 of the Registrant's 2013 Annual Report, which is filed as an exhibit to the Registrant's Form 10-K for the fiscal year ended December 31, 2013) and classified its investment in Affiliated Investment Funds as Level 2 using the fair value hierarchy. Fair value ordinarily is the value determined for the Affiliated Investment Funds in accordance with the fund's valuation policies and reported at the time of the Registrant's valuation by the management of the fund. Generally, the fair value of the Registrant's investment in the Affiliated Investment Funds represents the amount that the Registrant could reasonably expect to receive from the funds if the Registrant's investment was redeemed at the time of the valuation, based on information reasonably available at the time the valuation is made and that the Registrant believes to be reliable.

Of the Registrant's investments at June 30, 2014, $6,702,333 or 74.24% were classified as Level 1 and $2,326,198 or 25.76% as Level 2. Of the Registrant's investments at December 31, 2013, $8,376,757 or 74.36% were classified as Level 1 and $2,888,202 or 25.64% as Level 2. There are no Level 3 investments at June 30, 2014 or December 31, 2013, nor any portion of the interim periods.

The Registrant invests a portion of the excess cash balances not required for margin through certain investment funds which invest in (i) U.S. government securities (which include any security issued or guaranteed as to principal or interest by the United States), (ii) any certificate of deposit for any of the foregoing, including U.S. treasury bonds, U.S. treasury bills and issues of agencies of the United States government, (iii) corporate bonds or notes, or (iv) other instruments permitted by applicable rule and regulations (collectively, "Certain Investment Funds"). The objective is to obtain a rate of return for the Registrant that balances risk and return relative to the historically low yields on short term cash deposits with banks and or brokerage firms. There is no guarantee that the Managing Member will be successful in investing the excess cash successfully to obtain a greater yield than available on short term cash deposits with banks and or brokerage firms. The Managing Member is paid monthly 1/12 of 50% of the first 1% of the positive returns earned on the Registrant's investments in Certain Investment Funds. The calculation is based on the Registrant's average annualized Net Asset Value, and any losses related to returns on the Certain Investment Funds must first be recovered through subsequent positive returns prior to the Managing Member receiving a payment. After the calculation of the amount payable to the Managing Member, the Registrant will be credited with all additional positive returns (or 100% of any losses) on the Registrant's investment in Certain Investment Funds. If at the end of any calendar year, a loss has been incurred on the returns for the Certain Investment Funds, then the loss carry forward will reset to zero for the next calendar year with regards to the calculation of the Managing Member's portion of the Certain Investment Fund's income.

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Liquidity and Capital Resources

The Registrant commenced operations on January 1, 2007. Contributions were raised and redemptions paid through new Members' investments in and redemptions out of the aggregate trading vehicle through December 31, 2009. Beginning January 1, 2010, Individual Members may redeem directly from the Registrant on a monthly basis.

Subscriptions and Redemptions

Second Quarter 2014



Subscriptions of interests for the Second Quarter 2014 were $0. Redemptions of interests for the Second Quarter 2014 were $581,416.

Second Quarter 2013



Subscriptions of interests for the Second Quarter 2013 were $0. Redemptions of interests for the Second Quarter 2013 were $794,343.

Liquidity



A portion of the Registrant's net assets is held in cash, which is used as margin for its indirect trading in commodities through its investment in Affiliated Investment Funds.

Commodity contracts exposed to indirectly through the Registrant's investment in CTA Choice may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, commodity exchanges limit fluctuations in certain commodity futures contract prices during a single day by regulations referred to as "daily limits." During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract for a particular commodity has increased or decreased by an amount equal to the daily limit, positions in the commodity can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent the Registrant from promptly liquidating its indirect exposure through its investments in CTA Choice, to commodity futures positions.

Since the Registrant's business is to trade futures, forward and options contracts through its investment in Affiliated Investment Funds, its capital is at risk due to changes in the value of these contracts (market risk) or the inability of counterparties to perform under the terms of the contracts (credit risk). The Registrant's exposure to market risk is influenced by a number of factors including the volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of the Registrant's speculative trading as well as the development of drastic market occurrences could result in losses considerably beyond the Registrant's experience to date and could ultimately lead to a loss of all or substantially all of investors' capital. The Managing Member attempts to minimize these risks by requiring the Registrant and the Trading Advisor to abide by various trading limitations and policies, which include limiting margin amounts, trading only in liquid markets and permitting the use of stop loss provisions. See Note 10 of the Registrant's 2013 Annual Report for a further discussion on the credit and market risks associated with the Registrant's futures, forwards and option contracts held indirectly through its investment in Affiliated Investment Funds.

There are no known material trends, demands, commitments, events or uncertainties at the present time that are reasonably likely to result in the Registrant's liquidity increasing or decreasing in a material way.

Capital Resources



The Registrant does not intend to raise additional capital through the sale of interests offered or through any borrowing. Due to the nature of the Registrant's business, the Registrant does not contemplate making capital expenditures. The Registrant does not have, nor does it expect to have, any capital assets. Redemptions, exchanges, and sales of interests in the future will affect the amount of funds available for investments in futures interests in subsequent periods. It is not possible to estimate the amount, and therefore the impact, of future inflows and outflows of interests. There are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Registrant's capital resource arrangements at the present time.

26 Market Overview



Following is a market overview for the Second Quarter 2014 and the Second Quarter 2013:

Second Quarter 2014



The global capital markets are slowly moving towards a more divergent monetary policy environment, which has begun to create trading opportunities for certain CTAs in the second quarter. Ukraine-Russian tensions, the future course of ECB and Federal Reserve Bank actions, in addition to disparate Chinese economic releases moved market over the second quarter.

In the U.S., many investors still believe that Fed tightening is off in the distance because inflation remains low and growth mixed. This belief supported equity and bond markets during the second quarter. Safe haven buying also served to put a floor under bond prices. However, in the background, the Fed is gradually removing quantitative easing and indeed Fed bond buying is scheduled to end by the fall. At that time, a more divergent market environment could develop here.

In the UK, the economic picture, which is perhaps a step ahead of the US, is a bit brighter and as a result fears of Bank of England tightening are closer to the present. This ultimately weighed on FTSE as it fell off mid-quarter highs marked in May; prices in the gilt similarly fell late in the quarter but received a bit of lift as the BOE sought to temper expectations for high rates in the immediate term.

Japan raised sales taxes in the beginning of the quarter, but so far that has not seemed to have pushed the economy into a recession. Abe's structural reform program appears to be slowly moving forward. Any monetary tightening from Japan seems a bit more distant than in the US.

Conversely, in the Euro-Zone sluggish growth and low inflation paved the way for expectations that the ECB will continue to provide monetary stimulus. As such, German bund prices rose as inflationary readings fell and the DAX ended higher. It seems likely that monetary stimulus will be the longest lasting here compared to other developed markets.

In currency markets, volatility fell to multi-year lows as investors tried to find direction. In major currencies, the Japanese yen stayed within a relatively tight trading range. The British pound trended sharply higher as a string of strong economic readings sparked speculation that the BOE would be the first major central bank to raise the benchmark interest rates. The Australian dollar also rallied during the quarter as improving manufacturing in China buoyed the commodity currency. Conversely, sluggish readings in Europe weighed on the Euro as expectations increased for further ECB stimulus. The U.S. dollar was mixed, ultimately ending the period slightly off its first quarter close as vacillated on expectations for Federal Reserve activity. Finally, in other markets, the New Zealand dollar was lifted as the country again increased rates while the Norwegian krone slid lower on poor economic readings and increasing expectations for further interest rate reductions; the Swedish krona also moved lower during the 2nd quarter.

In the energies, crude oil was supported as global tensions rose. However, a jump in crude prices in response to crises in Iraq, Libya and the Ukraine did not emerge. In base metals, particularly zinc, prices rallied amid growing global demand and shrinking inventories. Better Chinese economic figures added impetus to the upward price move. Finally, in agricultural markets, grain prices made significant price moves lower - notably in corn and wheat - as perfect weather so far in the U.S. growing region is pointing to an abundance of supply at harvest.

Second Quarter 2013



Investors were caught off guard following Federal Reserve ("Fed") Chairman Ben Bernanke'sMay 22, 2013 testimony before Congress, when he stated that the central bank may begin tapering bond purchases in its quantitative easing ("QE") program as early as the Fed's next several meetings, if warranted by U.S. economic data. While Bernanke's comment was dismissed as old news by some commentators, the market didn't see it that way and the result was a sell-off in both equities and government bonds, and an increase in volatility across asset classes.

Concern about the end of QE gave new life to investors' "bad news is good news" response to economic data. For example, the Commerce Department's third and final estimate of first-quarter economic growth, released on June 26, 2013, came in at 1.8%, well below the previous estimate of 2.4%. Under normal circumstances, weaker-than-expected economic growth tends to drive down stock prices. However, shares advanced smartly in the wake of the news, as investors were hopeful that the disappointing data might help the Fed justify keeping its foot on the QE gas pedal a while longer. Ultimately, U.S. stocks ended the second quarter higher, with the Dow Jones Industrial Average advancing 2.92% and the S&P 500 Index gaining 2.91%.

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In the bond market, yields of U.S. Treasuries drifted lower in April but then climbed sharply higher in May and June, particularly after Chairman Bernanke's comments about tapering QE. The yield of the 10-year Treasury note soared to 2.52% on June 30, 2013 versus 1.87% at the end of March.

Japan's stock market has been rallying since mid-November 2012, and when the Bank of Japan announced a massive QE program of its own in April, the momentum accelerated, only to reverse sharply along with U.S. shares following Bernanke's statement. The Nikkei declined approximately 20% from its peak, before the rally resumed in late June. The index ended the quarter up approximately 10%.

In Europe investors have become accustomed to the issues surrounding the eurozone crisis and largely shrugged off events in the second quarter that in the past may have caused a large risk off trade. The political shift from austerity to more policies focused on economic growth was welcomed and signaled a change in sentiment that should reduce the fiscal drag faced by eurozone countries.

Commodity prices faced a challenging second quarter overall. Widely divergent trends emerged, as copper traded sharply lower, crude oil was virtually unchanged and grains prices were mixed. While the U.S. economy maintained a sluggish but ongoing recovery, China's economic growth slowed, impacting demand for commodities. Also impacting commodities was the possibility that the Fed would taper QE.

The precious metals sub-sector was the weakest, with gold prices dropping almost 23% in the second quarter on the possibility of the Fed's shift in monetary policy, record highs in the U.S. equity market, minimal inflation and higher real rates. The base metals sub-sector, dominated by copper, was hurt during the quarter by greater inventory levels and concerns about demand in the face of China's government's efforts to stem economic growth. Copper prices dropped 10.5% to three-year lows. Nickel, zinc, aluminum, lead and tin prices fell 17.7%, 2.3%, 6.9%, 2.9% and 15.3%, respectively.

The energy sub-sector saw more modest declines overall and more mixed results. West Texas Intermediate crude oil prices were virtually flat, declining just 0.7% during the quarter to end June at $96.56 per barrel. Brent crude oil prices fell more significantly, from $110.02 at the end of the first quarter to $102.82 at the end of the second quarter on higher inventories. Gasoline prices dropped 11.4%. Natural gas prices decreased 11.41% to approximately $3.572 per million British thermal units.

The agriculture sub-sector was strongest during the quarter, though still generated mixed results. Grains prices were dominated by movements in futures curves. Last year's draught limited current supplies and put upward pressure on front-month grain contracts, while the potential for record large crops hurt deferred pricing.

Sector Performance



Due to the nature of the Registrant's indirect trading activities, a period-to-period comparison of its indirect trading results is not meaningful. However, set forth below are the following:

(a) the major sectors to which the Registrant's assets were indirectly allocated as of the Second Quarter 2014 and the Second Quarter 2013, measured as a percentage of the "gross speculator margin" (i.e., the minimum amount of cash or marginable securities a speculator must post when buying or selling futures assets); and

(b) a discussion of the Registrant's indirect trading results for the major sectors in which the Registrant traded for the Second Quarter 2014 and the Second Quarter 2013.

28 Second Quarter 2014



As of June 30, 2014, the allocation of the Registrant's assets, through its investment in Affiliated Investment Funds, to major sectors was as follows:

Sector Allocation Currencies 37.35 % Energies 9.07 % Grains 5.78 % Indices 21.20 % Interest Rates 12.60 % Meats 0.17 % Metals 13.42 % Tropicals 0.41 % TOTAL 100.00 %



Trading results for the major sectors in which the Registrant traded indirectly for the Second Quarter 2014 were as follows:

Currencies: (+) Registrant experienced a majority of its gains in the British Pound, Brazilian real and Canadian dollar. The majority of its losses were incurred in the Japanese yen, euro and Swiss franc.

Interest Rates: (+) Registrant experienced a majority of its gains in European, Pacific rim and U.S. rates. There were no losses.

Indices: (+) Registrant experienced gains in U.S. European and Pacific Rim stock indices. There were no losses.

Energies: (-) Registrant experienced a majority of its gains in crude oil. The majority of its losses were incurred in heating oil.

Metals: (-) Registrant experienced a majority of its gains in nickel. The majority of its losses were incurred in copper, gold and silver.

Grains: (-) Registrant experienced no gains. The majority of its losses were incurred in soybeans.

Tropicals: (-)Registrant experienced a majority of its gains in cocoa. The majority of its losses were incurred in sugar.

Meats: (+) Registrant experienced a majority of its gains in live cattle. The majority of its losses were incurred in live hogs.

Second Quarter 2013



As of June 30, 2013, the allocation of the Registrant's assets, through its investment in Affiliated Investment Funds, to major sectors was as follows:

Sector Allocation Currencies 21.18 % Energies 5.50 % Grains 7.29 % Indices 15.06 % Interest Rates 5.76 % Meats 0.49 % Metals 43.52 % Tropicals 1.20 % TOTAL 100.00 %



Trading results for the major sectors in which the Registrant traded indirectly for the Second Quarter 2013 were as follows:

29



Currencies: (-)The Registrant experienced a majority of its gains in the Japanese yen. The majority of its losses were incurred in the Euro.

Energies: (-) The Registrant experienced a majority of its gains in gas oil. The majority of its losses were incurred in crude oil.

Grains: (+) The Registrant experienced a majority of its gains in soybeans. The majority of its losses were incurred in corn.

Indices: (+) The Registrant experienced a majority of its gains in the Nikkei index. The majority of its losses were incurred in the FTSE 100.

Interest Rates: (-) The Registrant experienced a majority of its gains in Euro-BTP futures. The majority of its losses were incurred in the German bobl.

Meats: (+) The Registrant experienced a majority of its gains in live hogs. There were no losses incurred.

Metals: (+) The Registrant experienced a majority of its gains in gold. The majority of its losses were incurred in aluminum.

Tropicals: (+) The Registrant experienced a majority of its gains in sugar. The majority of its losses were incurred in cocoa.

Results of Operations Year-To-Date 2014



The Net Asset Value of the Registrant as of June 30, 2014 was $9,960,173, a decrease of $2,963,057 from the December 31, 2013 Net Asset Value of $12,923,230, primarily due to the effect of investor redemptions and negative trading performance.

The Registrant's performance for the Year-To-Date 2014 was (11.28)%. Performance includes the percentage change in the Registrant's Net Asset Value excluding the effect of any subscriptions and redemptions and includes the percentage impact of investment gains/(losses) less any commissions and related fees and expenses. Past performance is not necessarily indicative of future results.

The Registrant's total gain from its investment in securities for the Year-To-Date 2014 was approximately $35,000.

The Registrant's total loss from its investment in Affiliated Investment Funds for the Year-To-Date 2014 was approximately $1,053,000.

Dividend income for the Year-To-Date 2014 was approximately $38,000, a decrease of approximately $22,000, as compared to the Year-To-Date 2013.

Brokerage commissions and other transaction fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Year-To-Date 2014 were approximately $12,000, a decrease of approximately $9,000 as compared to the Year-To-Date 2013, primarily due to the decrease in the Net Asset Value discussed above.

Management fees to the Trading Advisors, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Year-To-Date 2014 were approximately $96,000, a decrease of approximately $64,000 as compared to the Year-To-Date 2013, primarily due to the decrease in the Net Asset Value discussed above.

Management fees to the Managing Member for the Year-To-Date 2014 were approximately $154,000, a decrease of approximately $91,000 as compared to the Year-To-Date 2013, primarily due to the decrease in the Net Asset Value discussed above.

Trading Advisor incentive fees are based on the New High Net Trading Profits generated by the Trading Advisors, as defined in the Trading Advisory Agreements between the Registrant and the Trading Advisors. Trading Advisor incentive fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Year-To-Date 2014 were approximately $40,000.

30



An administrative services fee, which is indirectly paid to ClariTy for risk management and related services with respect to monitoring the Trading Advisors through the Affiliated Investment Funds and reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Year-To-Date 2014 was approximately $14,000, a decrease of approximately $9,000 as compared to the Year-To-Date 2013, primarily due to the decrease in the Net Asset Value discussed above.

Service fees for the Year-To-Date 2014 were approximately $182,000, a decrease of approximately $121,000 as compared to the Year-To-Date 2013, primarily due to the decrease in the Net Asset Value discussed above.

Managing Member interest earned on Certain Investment Funds for the Year-To-Date 2014 was approximately $25,000, a decrease of approximately $3,000 as compared to the Year-To-Date 2013.

Operating expenses include accounting, audit, tax, and legal fees. Operating expenses for the Year-To-Date 2014 were approximately $167,000.

Year-To-Date 2013



The Net Asset Value of the Registrant as of June 30, 2013 was $16,248,463, a decrease of $2,372,008 from the December 31, 2012 Net Asset Value of $18,620,471, primarily due to investor redemptions during the quarter.

The Registrant's performance for the Year-To-Date 2013 was (6.02)%. Performance includes the percentage change in the Registrant's Net Asset Value excluding the effect of any subscriptions and redemptions and includes the percentage impact of investment gains/(losses) less any commissions and related fees and expenses. Past performance is not necessarily indicative of future results.

The Registrant's total loss from its investment in securities for the Year-To-Date 2013 was approximately $120,000.

The Registrant's total loss from its investment in Affiliated Investment Funds for the Year-To-Date 2013 was approximately $264,000.

Dividend income for the Year-To-Date 2013 was approximately $60,000, a decrease of approximately $42,000, as compared to the Year-To-Date 2012.

Brokerage Commissions and other transaction fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Year-To-Date 2013 were approximately $21,000, a decrease of approximately $45,000 as compared to the Year-To-Date 2012, primarily due to the decrease in the Net Asset Value discussed above.

Management fees to the Trading Advisors, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Year-To-Date 2013 were approximately $160,000, a decrease of approximately $57,000 as compared to the Year-To-Date 2012, primarily due to the decrease in the Net Asset Value discussed above.

Management fees to the Managing Member for the Year-To-Date 2013 were approximately $245,000, a decrease of approximately $71,000 as compared to the Year-To-Date 2012, primarily due to the decrease in the Net Asset Value discussed above.

Incentive fees are based on the New High Net Trading Profits generated by the Trading Advisors, as defined in the Trading Advisory Agreements between the Registrant and the Trading Advisors. Incentive fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Year-To-Date 2013 were approximately $40,000.

ClariTy Managed Account fees, which are paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Year-To-Date 2013 were approximately $23,000, a decrease of approximately $8,000 as compared to the Year-To-Date 2012, primarily due to the decrease in the Net Asset Value discussed above.

Service fees for the Year-To-Date 2013 were approximately $303,000, a decrease of approximately $127,000 as compared to the Year-To-Date 2012, primarily due to the decrease in the Net Asset Value discussed above.

31



Managing Member interest earned on investment funds for the Year-To-Date 2013 was approximately $28,000, a decrease of approximately $25,000 as compared to the Year-To-Date 2012.

Operating expenses include accounting, audit, tax, and legal fees. Operating expenses for the Year-To-Date 2013 were approximately $179,000.

Inflation



Inflation has had no material impact on the operations or on the financial condition of the Registrant from inception through June 30, 2014.

Off-Balance Sheet Arrangements and Contractual Obligations

The Registrant does not have any off-balance-sheet arrangements (as defined in Regulation S-K 303(a)(4)(ii)) that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to Members.

The Registrant's contractual obligations are with the Managing Member, the Trading Advisors it accesses through its investment in Affiliated Investment Funds and its commodity broker. Trading Advisor management fees payable by the Registrant to the Trading Advisor through the CTA Funds and commencing January 1, 2010, management fees to the Managing Member, are calculated as a fixed percentage of the Registrant's Net Asset Value. Incentive fees payable by the Registrant to the Trading Advisor through the CTA Funds are at a fixed rate, calculated as a percentage of the Registrant's New High Net Trading Profits (as defined in the Advisory Agreement). As such, the Managing Member cannot anticipate the amounts to be paid for future periods as Net Asset Values and New High Net Trading Profits are not known until a future date. Commissions payable to the Registrant's commodity broker are based on a cost per executed trade and, as such, the Managing Member cannot anticipate the amount that will be required under the brokerage agreement, as the level of executed trades are not known until a future date. These agreements are effective for one-year terms, renewable automatically for additional one-year terms unless terminated. Additionally, these agreements may be terminated by either party thereto for various reasons. Additionally, since the Registrant does not enter into other long-term debt obligations, capital lease obligations, operating lease obligations or other long-term liabilities that would otherwise be reflected on the Registrant's condensed statements of financial condition, therefore a table of contractual obligations has not been presented. For a further discussion of the Registrant's contractual obligations, see Notes 1, 3, 4 and 5 of the Registrant's 2013 Annual Report, which is filed as an exhibit to the Registrant's Form 10-K for the year ended December 31, 2013.


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Source: Edgar Glimpses


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