CAMPBELL FUND TRUST - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.

March 29, 2016 - 8:06 AM EDT

CAMPBELL FUND TRUST - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

The Campbell Fund Trust (the "Trust") is a business trust organized on January 2, 1996 under the Delaware Business Trust Act, which was replaced by the Delaware Statutory Trust Act as of September 1, 2002. The Trust is a successor to the Campbell Fund Limited Partnership (formerly known as the Commodity Trend Fund) which began trading operations in January 1972. The Trust currently trades in the

U.S.

and international futures and forward markets under the sole direction of Campbell & Company, LP, the managing operator of the Trust. Specifically, the Trust trades in a diverse array of global assets, including global interest rates, stock indices, currencies and commodities. The Trust is an actively managed account with speculative trading profits as its objective.

Effective August 31, 2008, the Trust began offering Series A, Series B, and Series W Units. The units in the Trust prior to that date became Series B Units. Series B Units are only available for additional investment by existing holders of Series B Units.

As of December 31, 2015, the aggregate capitalization of the Trust was $928,081,406 with Series A, Series B and Series W comprising $711,962,948, $135,564,706 and $80,553,752, respectively, of the total. The Net Asset Value per Unit was $2,920.41 for Series A, $3,135.85 for Series B, and $3,198.49 for Series W.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in

the United States of America

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Trust's significant accounting policies are described in detail in Note 1 of the Financial Statements.

The Trust records all investments at fair value in its financial statements, with changes in fair value reported as a component of change in unrealized trading gains (losses) in the Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, estimates are involved in determining fair value in the absence of an active market closing price (i.e., forward contracts which are traded in the inter-bank market).

Capital Resources

The Trust will raise additional capital only through the sale of Units offered pursuant to the continuing offering, and does not intend to raise any capital through borrowing. Due to the nature of the Trust's business, it will make no capital expenditures and will have no capital assets which are not operating capital or assets.

The Trust generally maintains 60% to 75% of its net asset value in cash, cash equivalents or other liquid positions in its cash management program over and above that needed to post as collateral for trading. These funds are available to meet redemptions each month. After redemptions and additions are taken into account each month, the trade levels of the Trust are adjusted and positions in the instruments the Trust trades are added or liquidated on a pro-rata basis to meet those increases or decreases in trade levels.

Liquidity

Most

United States

futures exchanges limit fluctuations in futures contracts prices during a single day by regulations referred to as "daily price fluctuation limits" or "daily limits." During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Trust from promptly liquidating unfavorable positions and subject the Trust to substantial losses which could exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the Trust may not be able to execute futures trades at favorable prices, if little trading in such contracts is taking place. Other than these limitations on liquidity, which are inherent in the Trust's futures trading operations, the Trust's assets are expected to be highly liquid.

The entire offering proceeds, without deductions, will be credited to the Trust's bank, custodial and/or cash management accounts. The Trust meets margin requirements for its trading activities by depositing cash and

U.S.

government securities with the futures broker and the over-the-counter counterparty. This does not reduce the risk of loss from trading activities. The Trust receives all interest earned on its assets. No other person shall receive any interest or other economic benefits from the deposit of Trust assets.

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Approximately 10% to 30% of the Trust's assets normally are committed as required margin for futures contracts and held by the futures broker, although the amount committed may vary significantly. Such assets are maintained in the form of cash or

U.S.

Treasury Bills in segregated accounts with the futures broker pursuant to the Commodity Exchange Act and regulations thereunder. Approximately 5% to 15% of the Trust's assets are deposited with the over-the-counter counterparty in order to initiate and maintain forward contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is registered as a futures commission merchant. These assets are held either in

U.S.

government securities or short-term time deposits with

U.S.

-regulated bank affiliates of the over-the-counter counterparty.

The managing operator deposits the majority of those assets of the Trust that are not required to be deposited as margin with the futures brokers and over-the-counter counterparties in a custodial account with Northern Trust Company. The assets deposited in the custodial account with Northern Trust Company are segregated. Such custodial account constitutes approximately 60% to 75% of the Trust's assets and are invested directly by PNC Capital Advisors, LLC ("PNC"). PNC is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. PNC does not guarantee any interest or profits will accrue on the Trust's assets in the custodial account. PNC invest the assets according to agreed upon investment guidelines that first preserve capital, second allow for sufficient liquidity, and third provide a yield beyond the risk-free rate. Investments can include, but are not limited to, (i) U.S. Government Securities, Government Agency Securities, Municipal Securities, banker acceptances and certificates of deposits; (ii) commercial paper; (iii) short-term investment grade corporate debt; and (iv) Asset Backed Securities.

The Trust occasionally receives margin calls (requests to post more collateral) from its futures broker or over-the-counter counterparty, which are met by moving the required portion of the assets held in the custody account at Northern Trust to the margin accounts. In the past three years, the Trust has not needed to liquidate any position as a result of a margin call.

The Trust's assets are not and will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested in or loaned to Campbell & Company or any affiliated entities.

Off-Balance Sheet Risk

The term "off-balance sheet risk" refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Trust trades in futures and forward contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Trust, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Trust at the same time, and if the Trust's trading advisor was unable to offset futures interests positions of the Trust, the Trust could lose all of its assets and the Unitholders would realize a 100% loss. Campbell & Company, the managing operator (who also acts as trading advisor), minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30% however, these precautions may not be effective in limiting the risk of loss.

In addition to market risk, in entering into futures and forward contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Trust. The counterparty for futures contracts traded in

the United States

and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.

In the case of forward contracts, which are traded on the interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty credit risk. Campbell & Company trades for the Trust only with those counterparties which it believes to be creditworthy. All positions of the Trust are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Trust.

Disclosures About Certain Trading Activities that Include Non-Exchange Traded Contracts Accounted for at Fair Value

The Trust invests in futures and forward currency contracts. The market value of futures (exchange-traded) contracts is determined by the various futures exchanges, and reflects the settlement price for each contract as of the close of the last business day of the reporting period. The market value of swap and forward (non-exchange traded) contracts is extrapolated on a forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) of the last business day of the reporting period or based on the market value of its exchange-traded equivalent.

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Results of Operations

The returns for the years ended December 31, 2015, 2014 and 2013 for Series A were (6.71)%, 15.92%, and 8.80%, Series B were (6.21)%, 18.87%, and 10.38% and Series W were (5.09)%, 17.38% and 10.04%, respectively.

The following is a discussion of the management and performance fees accrued and paid. During the years ended December 31, 2015, 2014, and 2013, the Trust accrued management fees in the amounts of $33,963,706, $25,242,187, and $22,322,146, respectively, and paid management fees in the amounts of $33,383,399, $25,039,394, and $21,554,055, respectively.

During the years ended December 31, 2015, 2014 and 2013, the Trust accrued performance fees in the amounts of $13,671,976, $21,146,866 and $3,040,951, respectively, and paid performance fees in the amounts of $30,518,362, $4,304,051 and $3,037,380, respectively.

2015 (For the Year Ended December 31)

Of the (6.71)% return for year ended 2015 for Series A, approximately (7.13)% was due to brokerage fees, management fees, performance fees, offering costs and operating costs borne by Series A, offset by approximately 0.07% due to trading gains (before commissions) and approximately 0.35% due to investment income.

Of the (6.21)% return for year ended 2015 for Series B, approximately (6.63)% due to brokerage fees, management fees, performance fees and operating costs borne by Series B, offset by approximately 0.07% was due to trading gains (before commissions) and approximately 0.35% due to investment income.

Of the (5.09)% return for year ended 2015 for Series W, approximately (5.51)% due to brokerage fees, management fees, performance fees, service fees, offering costs and operating costs borne by Series W, offset by approximately 0.07% was due to trading gains (before commissions) and approximately 0.35% due to investment income.

An analysis of the 0.07% gross trading gains for the Trust for the year by sector is as follows:

Sector            % Gain (Loss)
Commodities                 1.83 %
Currencies                  3.08
Interest Rates             (4.01 )
Stock Indices              (0.83 )
                            0.07 %

The Trust had a strong start to 2015 with gains during January in all sectors - interest rates, commodities, foreign exchange, and stock indices. The largest gains for January came from long global interest rate positions driven by the trend-following strategies as interest rate products rallied during the month. Widespread deflationary concerns and slowing economic growth led to extraordinary central bank actions during the month. The European Central Bank (ECB) exceeded market expectations with their quantitative easing (QE) package and over ten other central banks eased financial conditions as well. Commodity positions were another source of profits during the month. Trend following strategies showed gains while non-trend programs produced some offsetting losses. Short energy exposure was one of the best performing sub-sectors as the sell-off across the energy complex continued unabated. Both WTI and Brent each lost more than 8% during the month. In the industrial metal sub-sector, short copper positioning was also a winner as slowing demand and growing inventories sent the price to a five year low. Precious metals produced the largest offsetting losses as shorts on silver and gold suffered from flight to safety buying during the month. Foreign exchange contributed additional gains, driven by the trend following systems. Long positioning in the

U.S.

dollar proved profitable, especially versus short the Canadian dollar and the euro. The Canadian central bank unexpectedly cut interest rates pushing their currency sharply lower. The ECB announced a larger than expected QE package that sent the euro down to levels not seen since 2003. Some offsetting losses were experienced in short Swiss franc positioning when the Swiss National Bank shocked global markets by suddenly removing its three-year old peg to the euro which sent the franc sharply higher. Stock index positioning from the trend following systems showed small additional gains during the month. Gains were found from long positioning in

Europe

and

Canada

where central bank easing provided a boost to equities in those regions.

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February for the Trust was composed of losses in commodities, interest rates, and foreign exchange offset gains from stock indices. The largest losses came from short commodity positions driven by both trend-following and non-trend following strategies. Short energy exposure was one of the worst performing sub-sectors as the crude complex experienced a significant bounce during the month after a sharp six-month sell-off. Signs of falling production, refinery disruptions, and cold weather helped to squeeze prices higher. Grain positions added to losses as short positions in corn and wheat were hurt by stronger export sales. Some offsetting gains were found in the soft commodities. A short position in coffee experienced profits as improving weather in

Brazil

boosted prospects for an abundant harvest which weighed heavily on the product. Interest rate positions were another source of losses during the month. Trend following strategies showed declines while non-trend programs produced some offsetting gains. Long positioning within

the United States

and the

United Kingdom

produced some of the largest losses as better economic data, improving inflation trends, and less dovish central bank comments pressured markets lower. Foreign exchange contributed small additional losses. Short positioning on the British pound versus the

U.S.

dollar suffered from hawkish

U.K.

central bank comments on the back of stronger than expected economic data. Some offsetting gains came from short euro and short yen positions, both versus the

U.S.

dollar, as diverging central bank policy paths continue to provide opportunity for our strategies. Stock index positioning from both trend following and non-trend following systems showed strong gains during the month. Global profits were found from long positioning in the

U.S.

Japan

Australia

Europe

, and

Canada

as a bounce in oil prices alleviated some fears around a global growth slowdown. Pockets of stronger than expected economic data linked with a tentative resolution to the Greek geopolitical crisis fed the risk-on sentiment for stocks. Gains in foreign exchange and commodities led to a profitable March for the Trust as profits from foreign exchange, commodity, and interest rate holdings all contributed while stock index positions produced some offsetting losses during the month. The largest profits for March were provided by foreign exchange positions from both trend following and non-trend strategies. Short euro positioning versus the

U.S.

dollar was one of the best performing holdings. The euro continued to trade lower as the European Central Bank's unprecedented monetary stimulus contrasted sharply with the US Federal Reserve, which many expect to raise interest rates later this year. The euro was also pressured lower as

Greece

struggles to secure bailout funds and avert a default. Other gains came from short positioning on several commodity currencies as the price of oil resumed its downward trend pulling those markets lower. Commodities were another source of profits during the month. Short positioning across the energy complex proved profitable as the sell-off in those markets began again amid new signs of global oversupply. A potential political agreement with

Iran

also threatened to dump even more supply on the already saturated market if Western sanctions are scaled back. Soft commodities were another source of gains. Short positioning on sugar and coffee produced profits as favorable growing weather increased expectations for plentiful supplies of those commodities. Small additional gains came from interest rate positions. Long positioning across long-dated global instruments continues to be the theme for positioning within this sector. Losses in

Japan

and

Germany

were more than offset by gains experienced in

the United States

Australia

, the

United Kingdom

, and

Canada

. Global stock indexes showed losses from both trend and non-trend strategies. Global stocks were mixed during March as some gains in

Europe

, helped by the ECB's quantitative easing program, were offset by losses in the

U.S.

U.K.

Canada

, and

Australia

hampered by a stronger

U.S.

dollar and falling global commodity prices. The Trust showed a decline in April as losses from foreign exchange, interest rate, and commodity holdings all contributed to the decline while stock index positions produced some offsetting gains during the month. Some of the largest losses for April were produced by foreign exchange positions from both trend following and non-trend following strategies. Short euro positioning versus the

U.S.

dollar was one of the worst performing holdings. The euro moved higher as weaker

U.S.

economic data suggested that the US Federal Reserve will hold off on an interest rate hike longer than expected. A calming of concern around the solvency of

Greece

also helped to boost the euro. Faster reacting non-trend models showed some offsetting gains in the British pound as that currency reversed higher during the month on hawkish

U.K.

central bank comments and an improvement in sentiment around their upcoming elections. Interest rates were another source of losses during the month. Long positioning across long-dated fixed income instruments provided most of the declines as global interest rate products sold-off. Losses in

Australia

stemmed from hawkish central bank comments and some surprisingly strong economic data. Concern over ultra-low interest rate yields in

Germany

linked with bearish comments from several prominent asset managers caused those bond prices to fall. Additional declines came from commodity positions. Short positioning across the energy complex was hurt by rising prices as supply concerns eased and the weaker

U.S.

dollar was supportive to prices. Trading in soft commodities, namely sugar and coffee, also produced losses. Non-trend strategies produced some offsetting gains within the industrial metals sub-sector. Long metals positions benefitted from a weaker

U.S.

dollar and new Chinese stimulus measures which helped to push those markets higher. Global stock indices showed gains from the trend strategies. Long positioning on the Hang Seng index in

Hong Kong

was one of the best performing holdings during the month as the index rose almost 13%.

Hong Kong

shares rose sharply when Chinese regulators allowed mutual funds to buy shares in companies included in the index.

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The Trust showed a decline in May as losses from interest rate and commodity holdings were only partially offset by gains from foreign exchange and stock index positions, leaving the portfolio lower on the month. Some of the largest losses were produced by interest rate positions from both trend following and non-trend strategies. Long positioning across long-dated interest rate products suffered when well established trends sharply reversed during the month. Some of the largest losses were seen in

Germany

and

Australia

. The German sell-off, which spilled over into other global interest rate markets, was primarily driven by technical factors, including liquidity and positioning.

Australia

saw some stronger than expected economic data, which put pressure on their interest rate markets. Additional declines came from commodity positions within trend following as non-trend strategies showed some smaller offsetting gains in the sector. One of the worst performing sub-sectors was industrial metals. Long positioning on copper and zinc suffered from a strengthening

U.S.

dollar and additional signs of an economic slowdown in

China

. Long positioning on precious metals also suffered from the stronger dollar. Some offsetting gains came from the grain sub-sector. Shorts on both corn and soybeans profited from a drop in prices due to steady planting progress. Some of the best gains during May were within foreign exchange holdings where both trend following and non-trend strategies showed profits. Short positioning on the Japanese yen versus the

U.S.

dollar was one of the biggest gains. The yen weakened to a 12-year low versus the dollar. After a soft first quarter, data suggested that the

U.S.

economy was starting to accelerate leading to speculation that the US Federal Reserve could raise interest rates later this year for the first time since 2006. Global stock indices also showed gains with both the trend and non-trend strategies contributing. Long positioning on the Japanese Nikkei 225 index produced some of the largest sector gains. Japanese stocks rose steadily throughout the month as the falling yen provided a strong tailwind for stocks. The Trust showed a sharp decline in June as losses from commodity, stock index, foreign exchange, and interest rate holdings left the Trust lower on the month. Some of the largest losses were produced by commodity positions from both trend following and non-trend strategies. Short positioning on various grain markets proved unprofitable. Corn, wheat, and soybean futures rose sharply due to crop concerns amid heavy rainfall in the Midwest. These moves were exacerbated by significant short covering in the marketplace. Energy markets also contributed to losses. A short natural gas holding was hurt by signs of slowing production growth, stronger power burns, and a slowing pace of storage builds which sent the market higher. Soft commodities showed losses as short positioning on coffee suffered from higher prices amid improved demand prospects and a lowered Brazilian output forecast. Additional declines came from stock index positions within both trend following and non-trend following systems. The Trust was generally positioned long global stocks during the month, with an emphasis on the

U.S.

and

Japan

. A lack of positive progress on the Greek financial crisis near month-end caused a bout of "risk-off" selling which sent all global stock markets sharply lower leading to losses. Foreign exchange positioning also detracted from performance as both trend and non-trend strategies saw declines. A short

New Zealand

dollar position proved to be a profitable trade given the continued downtrend, but most of the other currencies in the Trust saw negative performance due to choppy, directionless trading. In interest rate markets non-trend strategies provided some partially offsetting gains to the losses encountered by the trend systems. Global bond markets experienced some very choppy price action that was difficult for the trend systems to navigate. For example, in the

U.S.

interest rate markets were under pressure early in the month after some better than expected economic data. These markets then sharply reversed to the upside later in June driven by safe haven buying amid the worsening Greek financial crisis and the uncertainty that it fueled. The Trust showed a gain in July as profits from commodity and foreign exchange positions more than offset losses experienced on stock index and interest rate holdings. Some of the largest gains were produced by commodity positions from both trend following and non-trend strategies. Short positioning within precious metals was one of the most profitable trades during the month. Gold and silver both fell sharply amid the ongoing strength of the US dollar. Demand for gold by the Chinese government was shown to be much weaker than expected, sending the metal to its lowest level in five years. Short holdings on the industrial metals, namely copper, also proved profitable. Copper fell sharply amid growing concerns over the health of the Chinese economy. The Trust experienced some offsetting losses in the grains. A long position in wheat suffered as the commodity experienced a harsh sell-off due to healthy crop expectations and continued US export weakness. Additional profits during the month came from foreign exchange positions, especially within the trend following systems. Short positioning on the Australian dollar, Canadian dollar, and

New Zealand

dollar, commonly referred to as "commodity currencies," all proved profitable. The global commodity weakness seen during July, as evidenced by a more than 14% decline in the S&P GSCI Index, a measure of a basket of 24 commodities, pressured all these currencies lower. Stock index positioning detracted from performance as both trend and especially non-trend strategies saw declines. Short-term non-trend models struggled to successfully navigate several risk-on / risk-off shifts in the equity markets. The Greek financial crisis provided some of the market moving news as headlines shifted from dire to hopeful. Interest rate positions showed a decline during the month as losses from trend following strategies overwhelmed gains from non-trend systems. The Greek crisis proved to be a major driver of interest rate markets, in addition to ongoing expectations that the

U.S.

Federal Reserve is getting closer to its first interest rate hike in years.

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The Trust had offsetting gains and losses in August as profits from commodity positions were offset by losses in interest rate positions. Foreign exchange and stock index holdings had little positive or negative impact on the Trust. Some of the largest gains were produced by commodity positions from trend following systems as non-trend strategies showed some losses in the sector. Short holdings on the industrial metals, namely zinc, nickel, and aluminum, were some of the largest gainers amid growing concern that the Chinese economy is in worse shape than previously thought.

China

is a huge consumer of these metals. Short positions within the energy sub-sector also proved to be profitable trades during the month with Brent and WTI among the best gainers. Chinese growth concerns coupled with ongoing abundant petroleum supplies conspired to put downward pressure on prices. The Trust experienced some offsetting losses in the precious metals and soft commodities. A short position from gold suffered from flight to safety buying amid a sharp decline in global equities. A short holding on coffee was hurt in the first half of the month amid concerns surrounding smaller bean sizes in

Brazil

. Foreign exchange was relatively flat for August. Short positioning on the Canadian,

New Zealand

, and Australian dollars, commonly referred to as "commodity currencies," proved profitable. The Chinese economic slowdown was the catalyst for the sell-off in these markets. Offsetting losses were incurred by positioning in the Euro, Japanese yen, and Swedish krona. Stock index positioning had little impact on monthly performance. Shorter-term, faster reacting non-trend strategies showed gains in the sector while trend following systems with longer-term, slower indicators showed offsetting losses. Poor Chinese economic data linked with their surprising currency devaluation sent global stocks sharply lower. Interest rate positions showed a small decline during the month as losses from non-trend strategies overwhelmed gains from trend following systems. Interest rate markets experienced choppy price action amid risk-off / risk-on buying and selling plus continued uncertainty over the timing of the first US Federal Reserve rate hike in some nine years. The Trust showed a gain in September as profits from commodity and foreign exchange positions were the primary drivers during the month, although both fixed income and stock index holdings also contributed positively to the month's profits. The commodity sector produced gains during the month primarily driven by non-trend systems. Some of the best gains were found in short positioning on natural gas, WTI, and Brent. Natural gas sold off on inventory builds along with moderating power demand. Both WTI and Brent resumed their sell-offs as supplies remained robust while demand, especially from

China

, continued to show signs of slowing. A short position on live cattle was also a standout gainer as prices fell amid lower exports and increased supplies. Some partially offsetting losses were experienced in the sector from the precious metal and grain markets. Choppy price action for silver produced losses as the strategies failed to find successful trades. Short positions on both corn and wheat produced losses as those prices rose amid a variety of more bullish news. Additional gains were produced by foreign exchange positions from trend following systems as non-trend strategies showed some losses in the sector. Short holdings on the Canadian dollar, Norwegian krone, and Australian dollar (all versus the US dollar) were some of the most profitable trades during the month. A renewed sell-off in the energy complex linked with softness in commodity prices overall, helped to drag these currencies lower benefitting the Trust's short positioning. Interest rate positions also added to profits as trend strategies overwhelmed losses from non-trend following systems. Long positioning on German and Japanese long-dated fixed income produced some of the best gains. Buying seen in these markets was driven by safe haven demand amidst the slump in stock prices. Stock index positioning added a small gain to monthly performance. Shorter-term, faster reacting non-trend strategies experienced gains in the sector while trend following systems produced small losses. Global growth concerns plus several bearish, high-profile stock-specific news items, weighed on equities throughout the month. The Trust showed a loss in October as profits from stock index holdings were more than offset by losses from foreign exchange, interest rate, and commodity positions during the month. Foreign exchange positions from trend following strategies produced some of the largest losses for the Trust during October. The Trust held a net long US dollar positioning during the month. A weaker than expected September US employment report early in the month caused a US dollar sell-off for the first two weeks as expectations for a Federal Reserve rate hike began to fade. Long-term downtrends in many of the commodity currencies, such as the Australian and Canadian dollars, reversed which led to losses in those currencies. Non-trend strategies produced some offsetting gains in the sector. Interest rate positions contributed small additional losses to the Trust. Dovish comments from the ECB head Mario Draghi and a more hawkish than expected statement from the US Federal Reserve were the biggest drivers of interest rate markets. The Trust experienced gains in

Europe

, but more than offsetting losses in the US,

, and

Asia

from trend and non-trend systems alike. Commodity positions also detracted from the Trust's monthly P&L. Non-trend systems showed some strong gains that were offset by losses from trend strategies. Some of the best gains were found in the energy sub-sector with a short position on natural gas fueling profits. Warmer weather and near-record inventory levels pushed natural gas sharply lower. Offsetting losses across the other commodity sub-sectors left the sector lower on the month overall. The best gains during the month came from long positioning on global stock indexes. The sharp sell-off in global stocks from August and September was reversed during October. Signs that the US Federal Reserve was not quite ready to raise interest rates linked with new stimulus from

China

and expected stimulus from the ECB pushed stock prices sharply higher which benefitted both trend following and non-trend strategies.

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The Trust showed profits in November from commodity, foreign exchange, and
interest rate positions.  Stock index holdings provided some small offsetting
losses during the month. Commodity positions provided some of the best gains to
the Trust during November, with both trend following and non-trend systems
contributing.  Some of the best gains were found in the energy sub-sector with a
short position on natural gas fueling profits.  Warmer weather and record
inventory levels pushed natural gas prices lower.  Short positioning on Brent
and WTI also added to gains in the energy sub-sector as supplies remained
abundant.  Short holdings on the industrial metals, namely copper, zinc, and
nickel, also produced solid profits as a stronger US dollar, in addition to weak
demand and plentiful supplies kept prices under downward pressure.  Other sector
gains came from short positioning on corn and wheat as those prices fell amid
steady harvest progress leading to expectations for abundant supplies. Foreign
exchange positions from both trend following and non-trend strategies produced
additional profits.  A short holding on the euro versus the US dollar was one of
the best performing trades.  Expectations of divergent monetary policies between

Europe

 and the US put downward pressure on the euro.  The ECB is widely expected
to provide additional easing measures in December, while the US Federal Reserve
is broadly expected to increase interest rates during the same month.  A short
position on the Polish zloty also added to profits.  The combination of
potential ECB monetary policy easing, depressed energy prices, and the expected
interest rate increase by the US Federal Reserve put pressure on the Emerging
Market currencies. Interest rate positions contributed small additional gains to
the Trust, driven by the non-trend strategies.  Some of the best opportunities
were found in

Germany

, the

United Kingdom

Italy

the United States

, and

Canada

.
Some small losses during the month came from stock index positions, primarily
from non-trend systems.  A short position on Australian SPI 200 was one of the
worst trades in the sector.
December for the Trust comprised of losses from interest rate and stock index
holdings while foreign exchange and commodity positions provided some smaller
offsetting gains. Interest rate positions provided some of the biggest losses
during December, with both trend following and non-trend systems contributing.
Some of the largest losses came from the German 10-year and 5-year notes.  Long
positioning on these, and other global interest rate markets, suffered when ECB
president Mario Draghi disappointed markets early in the month.  Traders had
widely expected Mr. Draghi to announce major new stimulus measures at the ECB's
December meeting.  When he failed to live up to the high expectations, major
bond markets saw a sharp reversal in trend leading to losses for the sector.
The non-trend systems had a particularly difficult time navigating the choppy
price action that occurred after the disappointing ECB announcement. Some
additional losses during the month came from stock index positions, primarily
from the trend systems.  Long positioning on global stock indexes, especially
within

Europe

, were hurt by the underwhelming ECB stimulus announcement.  Many
major European indexes finished December with losses greater than 5% for the
month. Foreign exchange positions from both trend following and non-trend
strategies produced some offsetting profits.  One of the best performing
holdings was a short position on the Canadian dollar versus the US dollar.  The
Canadian currency is closely tied to the price of WTI and was dragged lower by
the sell-off in the oil market. Trend following and non-trend strategies each
produced some small gains in the commodity sector.  Short positioning within the
energy complex proved profitable as those markets remained under pressure amid
high supply and anemic demand.  The unseasonably warm weather also weighed on
those products used for home heating, such as gasoil.  Short positioning on the
industrial metals, namely aluminum, zinc, and copper, produced some losses as
oversold conditions led to a bounce in prices.
2014 (For the Year Ended December 31)
Of the 15.92% return for year ended 2014 for Series A, approximately 24.90% was
due to trading gains (before commissions) and approximately 0.28% due to
investment income, offset by approximately (9.26)% due to brokerage fees,
management fees, performance fees, offering costs and operating costs borne by
Series A.

Of the 18.87% return for year ended 2014 for Series B, approximately 24.90% was due to trading gains (before commissions) and approximately 0.28% due to investment income, offset by approximately (6.31)% due to brokerage fees, management fees, performance fees and operating costs borne by Series B.

Of the 17.38% return for year ended 2014 for Series W, approximately 24.90% was due to trading gains (before commissions) and approximately 0.28% due to investment income, offset by approximately (7.80)% due to brokerage fees, management fees, performance fees, service fees, offering costs and operating costs borne by Series W.

An analysis of the 24.90% gross trading gains for the Trust for the year by sector is as follows:

Sector            % Gain (Loss)
Commodities                 3.34 %
Currencies                  9.83
Interest Rates             15.18
Stock Indices              (3.45 )
                           24.90 %



                                       30

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The Trust had losses in January with gains from interest rate and foreign exchange holdings only partially offsetting declines from stock index and commodity investments. The largest losses for January came from long positioning in global stock indexes by the trend following strategies. Dampened growth momentum in

China

weighed on global risk assets and deepened the negative sentiment toward the emerging markets. The peso devaluation in

Argentina

helped push contagion fears to the forefront and added to the sell-off. Somewhat softer employment and housing data in the US called into question the economic growth momentum seen in the second half of 2013. The US Fed's further tapering of quantitative easing only added to the global unease for risky assets like equities. Commodity holdings also produced losses, primarily from non-trend strategies. Energy markets were among the largest losers as the models failed to profitably navigate a volatile trading environment. The volatility was caused by varying cross-currents including inventory data, cold weather, and shifting production expectations. Industrial metal losses came primarily from positions in copper and nickel which fell on the weaker Chinese economic data and resulting emerging market fall-out. Short exposure to gold also produced losses amid safe-haven buying and improving physical demand. Interest rate positioning was successful during the month with trend strategies showing the best gains. Some of the largest profits came from long positioning on long-dated instruments primarily in

Europe

and

the United States

as investor sought the safety of interest rate instruments amid growing global uncertainties. Foreign exchange holdings also produced gains during the month. The best performing position was a short holding on the Canadian dollar. The Bank of Canada downgraded its inflation outlook for 2014, pushing the Canadian dollar to a four year low versus the US dollar. The Trust also profited from a short position on the South African rand which experienced steep losses due to the significant depreciation of emerging market currencies seen during the month.

The Trust continued its losses in February with gains from interest rates not enough to offset losses from foreign exchange and commodity holdings. Foreign exchange positions produced some of the largest losses with trend and non-trend strategies contributing. Short positioning in the

New Zealand

dollar and Australian dollar (both versus the US dollar) caused the most significant losses. The

New Zealand

dollar strengthened after some stronger than expected economic data and hawkish comments from their finance minister. The Reserve Bank of Australia shifted their monetary posture from one of easing to a more neutral stance helping to push the Aussie dollar higher. Rising commodity prices during the month also provided a tailwind to these so-called "commodity currencies." Other large losses for the month came from commodities where the Trust experienced declines across most of the sub-sectors and from both trend and non-trend strategies. Short positions in precious metals produced the largest losses when silver and gold both rallied sharply on safe-haven buying as geopolitical fears rose due to unrest in

Ukraine

. Industrial metals also contributed as a weaker US dollar provided upward price pressure hurting shorts. Short positioning in gasoline, especially early in the month, hurt the Trust as prices rose due to decreasing stockpiles and curtailed production. Soft commodities, namely short positioning in sugar, also caused losses as drought conditions in

Brazil

created supply concerns. Interest rate positioning provided small offsetting gains. Profits were found in long holdings on long-dated instruments. Japanese government bonds rose as a combination of weaker economic data and further corporate lending activity by the Japanese government helped to push prices higher. German notes benefitted from tame inflation data and safe-haven buying amid geopolitical turmoil in the region. Stock index holdings were relatively flat on the month. The non-trend strategies detracted from positive trend following performance as some short positioning in

Asia

and parts of

Europe

was hurt by a sharp bounce-back rally after the January sell-off.

The Trust closed out the quarter with continued losses in March. The worst declines came from interest rate, stock index, and foreign exchange holdings. Some of the largest losses for the month came from interest rate positions, where trend strategies produced the declines while non-trend strategies showed some offsetting gains. A bulk of the sector losses were found in long positioning on long-dated instruments. Around mid-month, the US Federal Reserve announced additional tapering of quantitative easing (QE) and even hinted that an outright rate increase might occur sooner than expected, sending interest rate markets sharply lower and hurting portfolio positioning. Stock index positions also produced losses with both trend following and non-trend strategies contributing. Trend strategies held long positioning on the NASDAQ 100 index, which suffered due to technology valuation concerns, a tightening of stimulus by the US Fed, and uncertainty over

Russia's

annexation of

Crimea

and recent display of territorial aggression. Non-trend strategies went short the Hang Seng index in

Hong Kong

, which fell for the first half of the month, only to reverse higher on expectations for new stimulus measures in

China

to combat slowing growth within the country. Foreign exchange positions showed gains within the non-trend strategies; however, trend strategy losses in the sector overwhelmed them leading FX into the red for the month. The Trust was positioned short US dollars when the US Fed surprised markets with hawkish language following the March FOMC meeting. This caused the dollar to rally sharply against other currencies resulting in losses in the sector. Commodity positions produced losses from the trend following strategies while non-trend systems produced some offsetting gains. Some of the worst performing sub-sectors during the month included energy and industrial metals. The Trust was long crude, which declined amid slower Chinese growth. Natural gas longs fell on expectations for warmer temperatures in the US. Some offsetting gains were found in long grain positioning as the sub-sector posted its best quarterly rally since 2010.

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Offsetting gains and losses leave the Trust slightly lower in April. Profits from commodities, and to a lesser extent from interest rates, were offset by losses from foreign exchange and stock index holdings. Some of the largest losses during April came from foreign exchange positions. The non-trend strategies produced the bulk of the declines while trend strategies showed some gains in the sector. The non-trend strategies struggled with price action that was not favorable for the underlying model signals. The Trust was short Japanese Yen when the US Fed minutes dampened bets that US policy makers were moving towards raising interest rates, causing the Yen to appreciate. Trend following strategies profited from a long position on the British Pound, which rose to multi-year highs. Stock index positions also produced losses within the non-trend strategies while the trend following programs showed some offsetting gains. The non-trend models were positioned long the Japanese Nikkei index when the Bank of Japan disappointed markets with no new stimulus, causing a sell-off in Japanese equities. The German DAX index also contributed to losses as the non-trend strategies built long exposure, only to see the index trade lower as renewed Ukrainian/Russian unrest rattled investors. Commodity positions produced the best gains seen during the month as both non-trend and trend strategies produced profits. Nickel was a strong performer for the Trust as it trended higher throughout the month.

Indonesia's

ongoing export ban and Ukrainian unrest helped to push the metal to a 14-month high. Gains also came from long coffee holdings, which rose on Brazilian production concerns. Natural gas was another market that produced solid gains, especially within the non-trend programs. Cool spring temperatures and inventory concerns led to the rise in prices. Interest rate holdings added to gains during April. Losses from short holdings on short-dated instruments were more than offset by gains from long positions on long-dated instruments. A combination of pockets of softer economic data linked with the civil unrest in

Eastern Europe

helped to propel prices higher during the month.

The Trust showed gains in May led by interest rate and equity index positions. Profits from interest rate and stock index positions were somewhat offset by losses from commodity and foreign exchange holdings. The largest gains for May came from positioning in global interest rates driven by trend following strategies. Profits were seen in long-dated instruments where the Trust held long positions, while small losses came from short-dated holdings where the Trust was generally short. Fixed income instruments rallied during the month amid pockets of weaker than expected global economic data and as global central banks once again indicated accommodative monetary policies. Overall market positioning also played a role in the rally as some investors found themselves under-invested in global bonds and some hedge funds scrambled to cover shorts amid the rising prices. Long global stock index positions also produced gains for the Trust during May primarily driven by trend following strategies. Stocks showed choppy price action during the first half of the month, but then staged a rally as dovish global central banks and a surge in merger & acquisition activity pushed many global indexes to new highs. Commodity holdings produced the largest monthly losses with both trend and non-trend strategies contributing. The worst performing sub-sector was the grains where long positioning in wheat and corn suffered amid weak export sales, favorable planting weather in the US, and easing tensions between

Ukraine

and

Russia

. Base metals trading proved unprofitable amid choppy price action. A long position in coffee suffered as steady harvest progress in

Brazil

and a healthy global supply outlook pushed prices sharply lower after an almost 60% run-up this year. Foreign exchange holdings produced losses primarily from trend strategies as non-trend strategies showed gains. Some of the worst performing FX holdings included long positions in the euro and British pound. European Central Bank President Draghi signaled that policy makers are ready to expand stimulus resulting in a weakening of the euro, and the Bank of England indicated that a rate hike was not as imminent as markets had been expecting, causing the pound to fall from multi-year highs.

The Trust closed out the quarter with gains in June. Profits from stock index, commodity, and foreign exchange positions were somewhat offset by losses from interest rate holdings. The largest gains for June came from positioning in global stock indexes driven by both trend following and non-trend strategies. Long positions in North American stock indexes benefitted from dovish comments from Federal Open Market Committee head Yellen despite pockets of stronger economic data. Strong merger and acquisition activity also provided a tailwind for US stocks. A long equity holding in

Taiwan

showed profits as Chinese data indicated signs of improving growth. Smaller, offsetting losses came from long European holdings where a rash of weaker than expected economic data and falling confidence readings overwhelmed new European Central Bank stimulus actions. Commodity holdings produced additional monthly gains with only trend strategies contributing. Some of the best monthly gains came from long positioning on zinc, which surged in price amid a sharp drop in stockpiles. Long energy exposure, especially to Brent and crude, rose as instability in

Iraq

rattled oil markets. Cattle prices rallied to a record high on lingering supply concerns, benefitting the Trust's position. Offsetting losses came from short positions on precious metals as prices rose on a blend of geopolitical instability and ongoing accommodative US monetary policy. Foreign exchange holdings produced profits primarily from trend strategies as non-trend strategies showed losses. Some of the best performing FX holdings included a long position on the

New Zealand

dollar, which strengthened when the Reserve Bank of New Zealand lifted borrowing costs for the third time this year. Long positioning on the British pound benefitted when the Bank of England (BOE) hinted it may raise interest rates sooner than expected. A surprise interest rate cut in

Mexico

hurt the Trust's long positioning on the peso. Interest rate trading showed losses during the month with most declines coming from non-trend strategies. Hawkish comments from BOE head Carney caused a sharp sell-off in Gilts, which hurt the Trust's positioning. Rising Australian fixed income prices also hurt non-trend strategies, which expected prices to fall.

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The Trust showed little change during July with profits from commodity positions more than offset by losses in interest rates and foreign exchange. The largest gains for July came from positioning on commodities driven by trend following strategies. Grain markets were among the best performing subsector led by corn and wheat where the Trust held short positioning. Corn and wheat both dropped sharply during the month fueled by favorable weather which bolstered production expectations. Long positioning on industrial metals produced additional gains. Zinc rallied to a near three-year high on supply concerns after stockpiles fell to a multi-year low. Unfavorable price action within energy markets produced some of the largest offsetting losses within the commodity sector. Foreign exchange holdings produced some of the largest monthly losses primarily from trend strategies as non-trend strategies showed some offsetting gains. Long positioning on the

New Zealand

dollar and the British pound produced losses as those central banks dampened expectations for higher interest rates. Short positioning on the euro versus the US dollar was one of the best performing FX markets for the Trust. A policy split between the

U.S.

Federal Reserve (US Fed) and the European Central Bank (ECB) helped weaken the euro versus the dollar. The ECB is fighting falling inflation with an accommodative policy, while the US Fed is steadily removing stimulus. Interest rate trading showed losses during the month with declines from non-trend strategies overwhelming trend gains. Cross currents from rising geopolitical risks clashed with some better than expected economic data and a higher than expected inflation reading in

the United States

. The non-trend strategies failed to profitably navigate this choppy price action, especially in the

U.S.

and

Germany

. Stock index holdings were relatively flat in July. Positioning was long across the three major geographic regions:

Asia

Europe

, and

North America

. Some gains were seen in

Asia

, the US, and

Canada

on improving economic outlooks while losses across

Europe

were fueled by growth concerns which led to lower prices.

Interest rate and foreign exchange positions lead the Trust to strong gains in August. Profits from interest rates, foreign exchange, and stock indices were only slightly offset by small losses in commodities. The largest gains for August came from long positioning on long-dated interest rate markets driven by trend following strategies. The largest profits were found within

Europe

and

the United States

. An escalation of geopolitical tension in

Ukraine

Syria

, and the

Gaza Strip

provided a safe-haven buying tailwind. Weaker economic data in

Europe

, especially within

Germany

, and a dovish speech by ECB President Draghi provided an additional boost to rate markets. Smaller profits were seen in

Canada

Japan

, and

Australia

. Foreign exchange holdings produced additional gains from both trend and non-trend strategies. Some of the best performing FX holdings were short positions on the Euro and Japanese Yen both versus the

U.S.

Dollar. The Dollar outperformed most of its G10 peers during the month as better than expected

U.S.

economic data and commentary from FOMC officials continued to point toward a hawkish future change in interest rate guidance. Meanwhile central banks in

Europe

and

Japan

continued to beat a dovish drum which acted to weaken those currencies versus the Dollar. Long stock index positioning tacked on additional gains. Positions within the

U.S.

and

Taiwan

were among the best performing holdings. Improving

U.S.

economic growth and bullish merger and acquisition activity helped propel some

U.S.

indexes to record levels. The index in

Taiwan

was helped by strong rallies in semiconductor and electronic component shares. Commodity holdings created small losses during August. Gains from short positioning across the energy complex were more than offset by losses from various holdings within the industrial metal, grain, and meat sub-sectors. Near-term trend reversals within copper, zinc, wheat, and cattle contributed to the offsetting losses.

The Trust showed strong gains again in September. Profits from foreign exchange and commodity positions were only partially offset by losses on interest rate and stock index holdings. The largest gains for September came from foreign exchange positions primarily within trend following strategies. Diverging central bank policy paths were a major FX driver during the month. The Bank of Japan and the European Central Bank are both focused on keeping interest rates low while the

U.S.

Federal Reserve is starting to hint at higher interest rates. The Trust was positioned short the Japanese yen and euro versus the

U.S.

dollar and benefitted from these sharply different policy paths. Commodity holdings from the trend strategies produced additional gains while non-trend positioning showed some offsetting losses during the month. Some of the best gains came from short positioning on corn and wheat, both of which made new multi-year lows during the month. Short positioning across the energy complex and precious metal markets proved profitable as a persistently stronger

U.S.

dollar helped to push those markets lower. Non-trend strategies struggled with the persistent downtrend in the grain complex and also saw losses in the precious and base metals. Interest rate holdings produced losses from both trend and non-trend strategies. Some of the largest losses were found on long positioning within

the United States

. Leading up to the mid-month FOMC meeting,

U.S.

interest rate products sold-off over concerns that the committee would shift their interest rate guidance to reflect a more hawkish view. Other losses were seen in stock index positions where trend following signals produced declines while non-trend signals produced some offsetting gains. Trend following strategies produced losses from long positioning on global stock indexes with the exception of

Japan

where a sharply weaker yen led the Nikkei index to solid gains. More nimble non-trend systems quickly initiated short positioning and benefited from the sell-off across

Asia

(ex-

Japan

) as the Chinese economic slowdown and unrest in

Hong Kong

near month-end pushed regional indexes sharply lower.

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The Trust continued to show strong gains during October. Profits from interest rate, commodity, and foreign exchange positions were somewhat offset by losses on stock index holdings. The largest gains for October came from long global interest rate positions. Global growth fears gripped markets early in the month and drove fixed income products higher. Persistent economic weakness across

Europe

and

Asia

sparked concerns that the

U.S.

economic recovery could be negatively impacted. Sharply falling energy prices also created concern over deflationary pressures which could keep

U.S.

interest rates lower for longer. Central banks in

Japan

and

Sweden

enacted additional easing measures during the month to fight slow growth and deflationary forces. Commodity positions, especially from the trend following strategies, were another source of profits during the month. Short energy exposure was one of the best performing sub-sectors. Abundant

U.S.

supplies linked with falling global demand pushed the energy complex lower. Short positions on precious metals also added to gains as a stronger

U.S.

dollar and a dampening of geopolitical and Ebola fears caused a sell-off in gold and silver. Grains were the worst performing commodity sub-sector during October. Short positioning from the trend following strategies on corn and wheat was hurt by market short covering which pushed prices higher, reversing the recent multi-month downtrend. Foreign exchange contributed small gains. Long

U.S.

dollar positioning versus the Japanese yen and the euro proved profitable. Diverging central bank policy paths created fresh opportunities for the strategies during October. Stock index positioning, from both trend and non-trend strategies, experienced the largest offsetting losses during the month. Global long holdings early in October suffered from the global stock sell-off. Energy stocks led indexes lower as over-supply and a lack of global demand caused a rout in physical energy prices. Stock index prices bounced during the second half of the month, but by then the strategies had reduced long positioning and were in a more defensive posture in equities overall.

Gains across all major sectors lead to a profitable November for the Trust. The largest gains for November came from long global interest rate positions within the trend-following program. Global central banks were again in focus as the European Central Bank head Draghi gave his strongest statements yet that the bank could begin a US-style quantitative easing program in the near future. Additional stimulus is also expected from the Japanese central bank as they continue their long battle over slow growth and deflationary forces. Commodity positions were another source of profits during the month. Short energy exposure was the best performing sub-sector and dominated positive P&L within the sector overall. Both trend following and non-trend following strategies contributed to the energy gains. The downtrend in prices within the crude complex continued during November. The sell-off accelerated late in the month when OPEC announced that they would not cut production to address the sharply lower prices seen over the past several months. The worst performing sub-sector was industrial metals where non-trend strategies showed most of the losses. Long positioning on zinc and aluminum suffered as Chinese growth concerns linked with low global demand pushed the metals lower. Foreign exchange contributed additional gains to the Trust. Long US dollar positioning versus the Japanese yen proved profitable. Falling Japanese inflation and some weaker than expected economic reports weakened the yen significantly versus the US dollar. Stock index positioning, from both trend and non-trend strategies, proved profitable during the month. Global long holdings rose as major central banks, namely within

China

Europe

, and

Japan

, continued to provide, or gave indications that they would provide, additional stimulus.

The Trust realized solid gains in December to close-out a year of strong performance. Profits came from interest rate, foreign exchange, and commodity holdings offset mostly by stock index position losses. The largest gains for December came from long global interest rate positions within both the trend-following and non-trend following strategies. Global interest rate products rallied during the month as the collapse in crude oil prices has led to a sharp decline in inflation expectations. Geo-political uncertainty also helped to boost prices as the Russian ruble crisis and uncertainty around the Greek political situation drove safe-haven buying. Gains were particularly strong within

Japan

and

Europe

as those central banks remain committed to additional quantitative easing measures. Foreign exchange contributed additional gains, driven by the trend following systems. Overall, long

U.S.

dollar positioning proved profitable as the

U.S.

FOMC dropped its pledge to keep interest rates near zero for a "considerable time" as the American economy continued to show signs of strengthening. Short positioning on the Mexican peso versus the

U.S.

dollar was one of the best performing FX holdings. The peso sank in value as plunging oil prices damped speculation that a projected energy boom in the country would attract foreign investment and spur economic growth. Commodity positions were another source of profit during the month. Trend following strategies showed gains while non-trend programs produced offsetting losses. Short energy exposure was the best performing sub-sector and dominated returns in the sector as short positions in Brent and Gas Oil provided the largest gains. Oil prices continued to tumble amid the stronger

U.S.

dollar and OPEC failed to intervene in the market to stop the slide. Some offsetting losses were seen within the grains and precious metal commodity sub-sectors. Stock index positioning, from both trend and non-trend systems, proved unprofitable during the month. Global stock index performance was mixed during the month with most indices losing value. The ongoing decline in the energy complex, the Russian ruble crisis, and Greek political uncertainty all fueled a general risk reduction in stocks.

2013 (For the Year Ended December 31)

Of the 8.80% return for year ended 2013 for Series A, approximately 14.95% was due to trading gains (before commissions) and approximately 0.43% due to investment income, offset by approximately (6.58)% due to brokerage fees, management fees, performance fees, offering costs and operating costs borne by Series A.

Of the 10.38% return for year ended 2013 for Series B, approximately 14.95% was due to trading gains (before commissions) and approximately 0.43% due to investment income, offset by approximately (5.00)% due to brokerage fees, management fees and operating costs borne by Series B.

--------------------------------------------------------------------------------

Of the 10.04% return for year ended 2013 for Series W, approximately 14.95% was due to trading gains (before commissions) and approximately 0.43% due to investment income, offset by approximately (5.34)% due to brokerage fees, management fees, performance fees, sales commissions, offering costs and operating costs borne by Series W.

An analysis of the 14.95% gross trading gains for the Trust for the year by sector is as follows:

Sector            % Gain (Loss)
Commodities                 3.35 %
Currencies                  1.80
Interest Rates             (4.31 )
Stock Indices              14.11
                           14.95 %

2013 began on a positive note, as the Trust posted solid gains. Equity Indices and Foreign Exchange sectors responded to improved economic outlooks in the

U.S.

and

Europe

and to the promise of aggressive fiscal and monetary policy in

Asia

. Commodities were flat on the month, and the Interest Rates sector was the only significant detractor from performance. The Trust lost on a net-long position in global long-term rates as the sector moved lower on the same macroeconomic drivers that pushed equity markets higher and a general rotation out of bonds and into stocks. From a strategy perspective, longer-term trend following models were the most profitable strategies in January, with other complimentary strategies providing additional returns. Long global equity positions primarily from European and Asian holdings recorded the majority of gains. Positive data points out of

Europe

included the softening of tough "Basel III" regulations, a larger-than-expected repayment by banks of LTRO funds to the ECB, Spanish and Italian bond auctions bringing the lowest yields in months, and German ZEW surveys of sentiment that were much more optimistic. In

Asia

, the new Japanese government used every possible opportunity to push for a weakening of the Japanese Yen and a 2% inflation target to end decades of deflation. Exporters rallied as the Yen weakened throughout the month. The Trust's short Japanese Yen position was the most profitable trade in the portfolio during January. Losses in Interest Rates were not enough to offset gains as the sector exhibited a generally negative correlation to equities, hurting the Trust's long position.

The Trust, which consists of both trend following and non-trend following strategies, profited in February. The majority of gains came from the foreign exchange sector, while losses in equity index trading offset some of these gains. Interest rates and commodities had little impact on performance. Foreign exchange was the most profitable sector, contributing well over 1% to the Trust. In the

U.K.

, the British Pound (GBP) was down over 4% in February as weak economic fundamentals led Moody's to downgrade the

U.K.'s

Aaa sovereign debt rating to Aa1. The Trust made over 1% in GBP on a short position against the

U.S.

Dollar. The Canadian Dollar (CAD) also declined over 3% in February on global risk-off positioning and developments indicating a slowing Canadian economy. This led to additional gains on a short position against the currency. These gains were partially offset by losses from trading in equity indices where long positioning in European indices was unprofitable. Political uncertainty in the region, threatening a smooth recovery, caused downward moves in several major indices and reversed recent upward trends. Trading in North American indices was relatively flat for trend following strategies and losses in the region were driven by faster, non-trend following strategies getting caught in volatile market action. Trading in both interest rates and commodities was relatively flat in February. Renewed concerns over European sovereign debt and the impending

U.S.

sequester drove interest rate markets, producing small gains for the Trust. In commodities, gains in metals were offset by losses in energies, driven by the same macroeconomic factors that impacted the interest rates sector.

The Trust's strategies profited in three of four major sectors traded in March, with the majority of gains coming from commodities. Major economic drivers included Chinese and Japanese political developments, positive economic data in the

U.S.

, and the bank bailout situation in

Cyprus

. Trend following strategies contributed over 2% to the Trust, while other non-trend strategies detracted from performance. Gains in commodities were led by short positions in copper and aluminum as these industrial metals fell sharply during the month. Copper was pressured by new property tightening measures in

China

aimed at reining in overheated housing markets. Aluminum fell on reports that production climbed 2.4% in February. Soft commodities and energies also added to profits as supply and weather data moved markets in the direction of the Trust's positions. Equity indices, specifically long positioning in

the United States

and

Japan

, also added to monthly gains. A sharp uptick in

U.S.

non-farm payrolls and a downtick in the unemployment rate, followed by data indicating a steadily improving

U.S.

housing market helped push index levels higher. Japanese stocks rose for a seventh straight month, gaining over 7%, as Prime Minister Abe's efforts to end deflation began with his appointment of Haruhiko Kuroda to lead the Bank of Japan ("BOJ"). Positioning in foreign exchange contributed small gains to the Trust. The most profitable trade continues to be short Japanese Yen, with the new BOJ Governor stating he will do "whatever it takes" to achieve his goal of a 2% inflation target within two years.

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The Trust gained in both trend following and non-trend following strategies in April, with gains coming from all sectors traded. Major moves in metals and long-dated interest rate markets led gains, each adding over 3% to the Trust. Slow global growth, disappointing economic data, low or stable inflation rates, and continued quantitative easing pushed rates lower and equity markets higher across major markets, extending or establishing trends and other alpha opportunities. Commodity markets recorded the best gains for the Trust, led by precious metals, base metals, and energies. Short positioning in precious metals benefitted from a sharp decline in prices. The weakness in gold can be attributed to several factors including low or falling inflation readings, concern that European central banks will sell gold reserves to help fund bail-out costs, outflows from related exchange traded products, and signs of slower global economic growth, especially in

China

. The Trust began April short precious metals, posting the majority of gains on April 12 & 15 when the sector significantly declined, at which point the Trust began to take profits and reduce its positions. Long positions on long-dated interest rate markets in the

U.S.

Canada

, and

Australia

were also profitable during April. Disappointing economic data, stable inflation, falling commodity prices, and dovish stimulus policy in

Canada

pushed fixed income prices higher. This particularly impacted the long-dated rate contracts, as they are more sensitive to the interest rate movements than the short-dated rates. Stock index positions added further gains during the month, with long positioning in

Japan

Australia

, and the

U.S.

leading the way. Japanese and Australian markets moved higher on continued central bank easing while

U.S.

markets bounced around throughout the month but finished higher, hitting record highs in the S&P 500 and Dow Jones Industrial Average. The foreign exchange sector added small gains during the month. Trend-following strategies lost money in the sector, but non-trend strategies more than offset those losses. By market, the Japanese Yen and New Zealand Dollar versus the

U.S.

Dollar were the most profitable trades in April.

The Trust's gross trading was basically flat in May. Gains in stock indices, foreign exchange, and commodity holdings were offset by losses in fixed income positions. Both trend and non-trend strategies showed gains in long equity index positions. The gains were concentrated in European and US holdings. In

Europe

, gains were led by the

where manufacturing and business confidence data strengthened. In the US, stocks rose after employment-related data showed signs of improvement and consumer confidence measures were also better than expected. Foreign exchange gains came primarily from long US dollar positions against the South African rand, the British pound, and the Canadian dollar. The US dollar strengthened against all major currencies amid better economic data and signs that the US Federal Reserve may soon begin to taper its quantitative easing (QE) measures. Commodity holdings added small additional gains to the Trust. Gains were found in short precious metal positions as both gold and silver declined on concerns over QE tapering and weak physical demand out of

Asia

. Grain positions, namely long soybean positioning, benefitted from strong Chinese export sales and US supply concerns. Unfortunately, these gains were mostly offset by losses from industrial metal and energy positions. Short positions in industrial metals, namely copper and aluminum, moved against the Trust as prices rose due to signs of tightening supply and amid short covering. Long positioning in natural gas was the biggest loser in energy holdings as prices fell sharply when seasonal demand waned and inventories rose more than expected. Overall monthly gains were offset by losses in long fixed income positions within

Europe

, the US,

Japan

, and

Canada

, primarily from the long-dated holdings within the trend-following strategies. Global fixed income prices fell sharply during the month for the same reasons the US dollar strengthened - mainly over concern that US QE measures would begin to wind down in the near future amid strengthening economic data which could cause interest rates to rise.

The Trust had a net loss in June. Declines in stock indices and foreign exchange were only partially offset by gains from commodities and fixed income. The primary focus of global markets in June revolved around the fear that the US Federal Reserve was beginning to signal that their aggressive QE measures were going to be reduced or "tapered" amid stronger US economic trends. World markets have enjoyed the benefits of the unprecedented liquidity that the US central bank has pumped into the banking system over the past five years, however the announcement by Fed Chairman Bernanke on June 19th that QE tapering could begin as soon as year-end roiled global markets. Trend strategies showed their largest losses in long equity index positions. The losses were spread across all global equity markets as they sold off on the concern that US QE tapering could be expected in the near future. Non-trend strategies showed gains in foreign exchange positioning, but the trend-following models produced losses that more than offset any gains. The trend strategies showed the greatest losses on the Japanese yen and the British pound as both showed sharp trend reversals post Bernanke's tapering comments mid-month. Trend-following strategies delivered gains in commodities, especially within short industrial metals and precious metals positioning. Concerns over a Chinese credit crunch plus fear over the potential impact from QE tapering pushed both types of metals lower. Gains were somewhat offset by losses from energy positions which generally saw sharp mid-month trend reversals due to the strengthening US dollar amid fears that monetary accommodation would begin to be withdrawn. Both non-trend and trend strategies showed gains in short positioning on fixed income instruments. Global fixed income markets sold off sharply on fears over QE tapering. The faster reacting non-trend models quickly built short positions and benefitted from the extended declines.

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The Trust had small gross trading losses in July. Gains from stock indices were more than offset by losses from foreign exchange, fixed income, and commodities. The largest losses during the month were found within foreign exchange holdings primarily from short positioning against the Canadian dollar and the

New Zealand

dollar. These currencies both appreciated on hawkish leaning central bank comments and amid better economic data. The Australian dollar produced one of the largest FX gains as the Royal Bank of Australia indicated that they had room to cut interest rates which was supported by tame inflation data. Short positioning within both short and long dated fixed income instruments also caused losses, especially within the trend following strategies. Members of the US Federal Reserve, including Chairman Bernanke, emphasized to world financial markets that a tapering of QE programs does not necessarily mean a tightening of interest rates. This message helped push fixed income instruments higher, hurting the Trust's short positioning. Non-trend strategies showed small losses as well. Commodity positions were another source of losses during July. The "QE tapering does not mean tightening" message helped gold appreciate over 7% which hurt recently profitable trend following short positioning. Long positioning gains within energies, especially on crude and Brent oil, offset some of the sector's overall losses. New

Middle East

tensions in

Egypt

, early month inventory draws, and some favorable economic data in the US all pushed most energies higher on the month. Long stock index positions helped to mostly offset losses. Most global stock markets rallied during July driven by expectations for continued monetary support from major central banks, generally better than expected second quarter earnings reports, and additional signs that global economic growth is improving, especially within

Europe

and the US. Trend following strategies showed solid gains on long positioning within global stock indices; however, non-trend strategies showed small losses on the sector.

The Trust's losses continued in August. Gains from interest rates were more than offset by losses from commodities, foreign exchange, and stock index holdings. Commodities produced the largest losses on the month, led by short industrial metal and precious metal positions. Improving macro economic data from

China

, including better than expected industrial production and import/export data, pushed industrial metals higher. Some weaker US economic data, including a disappointing July employment report and softer pending home sales, sent precious metals higher on hopes for a delay in US Federal Reserve quantitative easing (QE) tapering. Long energy holdings helped to offset some losses as increased geopolitical tensions related to

Syria

drove petroleum markets higher. Short positions in corn and wheat led to early month profits as healthy harvest expectations sent the grains lower. Foreign exchange holdings also produced losses during August. Long positioning in the euro and Swiss franc produced the largest losses as both currencies fell due to a strengthening US dollar supported by a hardening of expectations for Fed QE tapering and risk aversion driven by geopolitical concerns over

Syria

. Non-trend strategies produced some offsetting gains in foreign exchange as short positioning in the Canadian dollar and Australian dollar proved profitable due to risk-aversion. Long global stock index positions showed profits early in the month as the strength seen in July continued into August. Unfortunately, losses were incurred as concerns surrounding QE tapering by the US Fed and new fears over military tensions between the US and

Syria

caused global stocks to sell-off throughout the second half of the month. Nimble non-trend strategies showed profits in stock indexes by quickly getting short the second-half sell-off as geopolitical fears gripped world markets. Short interest rate positions produced gains for the Trust during August. Stronger economic data in

Germany

and the

linked with expectations for US Fed QE tapering helped push European and US interest rate instruments lower. Gains were limited by late month reversals on flight-to-quality positioning due to the Syrian situation.

The Trust's losses continued in September. Gains from stock indexes were more than offset by losses from commodity, foreign exchange, and interest rate holdings. Commodities produced the largest losses on the month, led by long energy and short industrial metal positions. A calming of tensions between the US and

Syria

caused a sell-off in energy markets, reversing the gains seen during August. Industrial metals gained on the election of a pro-business Prime Minister in

Australia

and amid some better Chinese economic data. The non-trend following strategies were long gold, which produced some offsetting gains on the US Fed's surprise decision to delay a tapering of its monthly quantitative easing (QE) program. Foreign exchange positions produced losses as well. The US dollar was broadly weaker versus most other G10 currencies during September with the US Dollar Index hitting a seven-month low. The largest losses for the Trust were found in short Canadian and Australian dollar positions. The Fed's surprising decision to delay tapering its $85 billion monthly asset purchase program sparked a sharp rally in these currencies versus the US dollar. Some offsetting gains were found from long positioning on the British pound and Swiss franc versus the dollar. Interest rate positions, primarily short holdings on the short-end of the curve, produced additional portfolio losses. The Fed's surprise decision to delay QE tapering, some pockets of softer global economic data including a weaker than expected US employment report, and reports of a US government partial shutdown near month-end all helped to push fixed income instruments higher during September. Long stock index holdings produced the only sector gains in the Trust during the month. A peaceful resolution of the US/Syrian crisis, renewed confidence that Janet Yellen would be nominated to be the next head of the US Federal Reserve, and the Fed's decision to fully maintain QE helped most global stock markets to post solid gains. Profits were capped by late month concerns about a showdown in

Washington

over government spending that ultimately resulted in a partial shutdown of the US government.

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The Trust had positive performance in October. Losses from foreign exchange and commodity positions were more than offset by profits from stock index and interest rate holdings. The strongest Trust gains for October came from long positioning in global stock indexes, driven by both trend and non-trend strategies. News during the month was dominated by the US government shutdown which resulted after Congress failed to pass legislation to fund operations. Global stocks initially sold-off as

Washington

dysfunction put the country on a potential path to default. In addition, many government-supplied economic reports were cancelled, leaving global investors with limited visibility into the health of the US economy. However, stocks turned higher as expectations for a funding deal grew and when an agreement was announced near mid-month, stocks charged even higher. Interest rate positions, namely from long-dated holdings, also added to monthly profits, although non-trend strategies limited gains. Global fixed income instruments generally moved higher after the US government reopened and default concerns subsided. Both fixed income and stock investors embraced the idea that any reduction in US Federal Reserve quantitative easing (QE) would be delayed into 2014 due to the economic drag the government closure created for growth. Foreign exchange holdings produced losses as various long positions against the US dollar declined. A long position in the Canadian dollar was among the worst performing holdings after the Bank of Canada dropped its tightening bias after they downgraded their economic assessment and pointed to downside risks to inflation. Commodity holdings produced losses primarily from non-trend strategies. The worst performing sub-sector was energy where a short position in natural gas early in the month was hurt by cooler temperatures. The strategies then flipped to long and were hurt when inventories grew more than expected. Industrial metals also produced losses due to a choppy trading environment. The largest gains came from the grains and softs where short positions in wheat and coffee profited from abundant supplies.

The Trust's positive performance continued in November. Profits from stock index, commodity, and foreign exchange positions were only slightly offset by losses from interest rate holdings. The strongest gains for November came from long positioning in global stock indexes driven by trend following strategies. Stocks continued their strong year-to-date run during the month as additional easing by global central banks, namely the European Central Bank (ECB) early in the month, and generally better than expected economic data kept a tailwind behind stocks.

Japan

showed some of the strongest gains rising over 9% as the yen weakened, benefitting their export-driven economy. A solid rise in US and German stocks also benefitted the Trust. Commodity holdings also produced profits, primarily from non-trend strategies. The best performing sub-sector was grains where a long position in soybeans was helped by strong export sales and frost-damaged crops. Short positions in wheat and corn benefitted from an improving outlook for both US and Chinese production and a bearish US government crop report early in the month. Short positions in precious and industrial metals also contributed to gains. Less dovish FOMC minutes helped revive quantitative easing (QE) taper fears which pushed the metals lower. Soft commodities and meats produced some small offsetting losses. Foreign exchange holdings produced small gains. A short position on the Japanese yen versus the US dollar benefitted as the yen weakened steadily throughout the month with some weaker Japanese economic data and renewed US QE taper fears to blame. The worst performing foreign exchange position was a long holding on the euro versus the US dollar which suffered when the ECB surprised markets with an interest rate cut. Interest rate positions, namely from long-dated holdings within the non-trend strategies, produced losses for the Trust during November. A choppy global trading environment for interest rate instruments proved difficult for the strategies to profitably trade.

The Trust had a net loss in December. Profits from stock index and foreign exchange positions were more than offset by losses from commodity and interest rate holdings. The largest losses for December came from positioning in global interest rates driven by trend following strategies. Losses were seen in both short-dated and long-dated instruments. Anticipation that the US Federal Reserve would begin tapering its quantitative easing (QE) program came to fruition around mid-month causing interest rates to generally rise throughout December. Losses were greatest in short-dated instruments where the portfolio had long positioning which suffered from improving economic data and the beginning of the Fed's QE taper. Commodity holdings also produced some losses, primarily from non-trend strategies. The worst performing sub-sector was industrial metals where short positioning suffered as a rally, sparked by increasing optimism over growth in

China

and the US, boosted metal prices. Some offsetting gains came from short precious metal holdings which continued to trend lower amid the Fed's move to begin exiting its loose money policy. Wheat produced the largest gains within the grains as weaker than expected export demand and ample global supplies pushed the commodity to a 20-month low. Foreign exchange holdings produced gains. The largest gains came from short positions on the Japanese yen and the Australian dollar versus the US dollar. The Fed's decision to begin tapering linked with ongoing easy money policies in

Japan

pushed USDJPY to new multi-year highs. The Australian dollar fell almost 2% versus the US dollar. Long stock index positions produced the largest gains during December primarily driven by trend following strategies. Global stocks generally sold off in the first half of the month as investors were anxious ahead of the Fed's QE taper decision. Stocks rallied sharply post the Fed's taper announcement as investors digested the news and found themselves underinvested in an improving economic landscape. Stocks moved to new highs helping to fuel gains in the sector.

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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Source: Equities.com News (March 29, 2016 - 8:06 AM EDT)

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