INVESTMENT IN AFFILIATED INVESTMENT FUNDS

6 Months Ended

Jun. 30, 2016

Investment In Affiliated Investment Funds

INVESTMENTS IN AFFILIATED INVESTMENT FUNDS

Note 7.

INVESTMENT IN AFFILIATED INVESTMENT FUNDS

The Company invests a portion of its assets in Affiliated Investment Funds. The Company’s investment in Affiliated Investment Funds represents 71.89% and 0% of the Net Asset Value of the Company at June 30, 2016 and December 31, 2015, respectively.

The investment in Affiliated Investment Funds is reported in the Company’s condensed statements of financial condition at fair value. The Company records its proportionate share of income or loss in the condensed statements of operations. The investments are subject to the terms of the organizational and offering documents of the Affiliated Investment Funds.

The following tables summarize the change in net asset value (fair value) of the Company’s investment in Affiliated Investment Funds for the Year-To-Date 2016 and the Year-To-Date 2015:

	Net Asset Value December 31, 2015		Purchases		Gain (Loss)			Redemptions			Net Asset Value June 30, 2016
CTA Choice ISAT	$	0	$	3,914,631	$	(552,710	)	$	(2,244,176	)	$	1,117,745
CTA Choice KEY		0		3,640,420		108,662			(365,205	)		3,383,877
Total	$	0	$	7,555,051	$	(444,048	)	$	(2,609,381	)	$	4,501,622

	Net Asset Value December 31, 2014		Purchases		Gain (Loss)			Redemptions			Net Asset Value June 30, 2015
CTA Choice EGLG	$	1,399,957	$	3,501,000	$	256,302		$	(5,157,259	)	$	0
CTA Choice QNTM		0		2,981,115		41,024			(197,596	)		2,824,543
CTA Choice WTN		1,133,759		4,737,904		(203,588	)		(1,177,692	)		4,490,383
Total	$	2,533,716	$	11,220,019	$	93,738		$	(6,532,547	)	$	7,314,926

The Affiliated Investment Funds are redeemable monthly and require a redemption notice of 1-5 days. The Company may make additional contributions to or redemptions from the Affiliated Investment Funds on a standard allocation date. The Affiliated Investment Funds engage in trading commodity futures including agricultural, currency, energy, interest rates and stock indices among other types, foreign currency forward contracts and options on futures contracts.

The Company records its proportionate share of income or loss in the condensed statements of operations.

Prior to May 1, 2015, the Company’s investment in Affiliated Investment Funds was not fully funded, but was subject to additional capital calls up to the full amount of the capital commitment. Effective May 1, 2015, in accordance with the amendment to CTA Choice’s Private Placement Memorandum, the full amount of the Company’s capital contribution to an Affiliated Investment Fund will be funded by each Trading Advisor pursuant to its trading strategy at the Affiliated Investment Fund’s Investment Level Factor. An Affiliated Investment Fund’s Investment Level Factor multiplied by the capital contribution of the Company to an Affiliated Investment Fund shall equal the Company’s Investment Level.

An Affiliated Investment Fund’s Investment Level Factor is the trading leverage factor of an Affiliated Investment Fund, as designated by Clarity from time to time for such Affiliated Investment Fund, and reflects the level at which a Trading Advisor is instructed to trade the Affiliated Investment Fund’s assets. Clarity may increase or decrease the Affiliated Investment Fund’s Investment Level Factor in its sole discretion.

The following table sets out the total capital contribution and Investment Level split between net asset value:

	Total capital contribution June 30, 2016		Total investment level June 30, 2016
CTA Choice ISAT	$	1,117,745	$	3,528,772
CTA Choice KEY		3,383,877		4,030,750
Total	$	4,501,622	$	7,559,522

The Company did not hold any investment in Affiliated Investment Funds at December 31, 2015.

The Company’s investment in Affiliated Investment Funds is subject to the market and credit risks of securities held or sold short by their respective Affiliated Investment Fund. Clarity has established procedures to monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The interestholders within CTA Choice bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received.

KMP Futures Fund I LLC 10-Q