Annex

The definition of “Broker” in Section 1 of the Annex shall be as follows:  “Broker” means a broker, dealer, futures commission merchant, clearing broker or other entity selected by the Investment Adviser and approved by the Manager to provide execution services (for the avoidance of doubt, this definition is not intended to supersede Section 4(a) of the Agreement).”

The definition of “Client” in Section 1 of the Annex shall be as follows: “Client’ means ML Winton FuturesAccess LLC.”

The definition of “Investment” in Section 1 of the Annex shall be as follows: ”Investment’ means exchange traded futures and forwards, currency forwards traded over the counter, derivatives linked to securities indices (including swaps and equity index futures) and other related instruments that the Investment Adviser may trade pursuant to the Investment Strategy and subject to the Investment Restrictions.”

The definition of “Management Entity” in Section 1 of the Annex shall be as follows: “Management Entity’ means Merrill Lynch Alternative Investments LLC.”

The following shall be added as the final sentence of Section 5.1 of the Annex: “For the avoidance of doubt, this provision amends Section 10(a)(v) of the Agreement.”

The following shall be added as the final sentence of Section 6.1 of the Annex. “For the avoidance of doubt, this provision is In addition to and does not supersede Section 27(a) of the Agreement.”

Unless otherwise defined, terms used in this Annex shall have the meaning given to them in the Agreement.

References to statutory provisions, regulations, notices, guides or the FCA Rules shall include those provisions, regulations, notices, guides or FCA Rules as amended, extended, consolidated, substituted, re-issued or re-enacted from time to time.

References to Clauses are to clauses of this Annex and headings are inserted for convenience only and shall not affect the construction of this Annex.

The Investment Adviser is authorised and regulated by the Financial Conduct Authority. The FCA’s address is 25 The North Colonnade, Canary Wharf, London, E14 5HS.

The Investment Adviser has categorised the Client as a professional client (as defined in the FCA Rules) and the Investment Adviser will provide its services under the Agreement on that basis.

The Client has the right to request the Investment Adviser to categorise it as a retail client (as defined in the FCA Rules) either generally or in specific circumstances. However, it is the Investment Adviser’s policy not to agree to such requests.

Except as otherwise specified in the Agreement, the Client and the Investment Adviser may communicate by letter, email or any other form of communication agreed by the Investment Adviser. All communications shall be in English.

The Client may communicate with the Investment Adviser using the following contact details:

Under the FCA Rules the Investment Adviser is required to establish an appropriate method of evaluation and comparison, based on the investment objective and approach set out in the Investment Advisory Agreement and the types of Investments included in the Portfolio, so as to enable the Client to assess the Investment Adviser’s performance. The Investment Adviser shall periodically provide performance information relating to the Portfolio during the term of the Investment Advisory Agreement. As the investment objectives set out in the Investment Advisory Agreement do not reference outperformance of a specified benchmark and the Portfolio will include a broad range of financial instruments, the Client may wish to consider the Barclay Hedge Fund Index as an appropriate reference index to evaluate the Investment Adviser’s performance. The Barclays Hedge Fund Index is a measure of the average return of all hedge funds in the Barclay database. Further information is available here:
https://www.barclayhedge.com/research/indices/ghs/HedgeFundIndex.html.

The parties agree that, when executing transactions in Investments on behalf of the Client, or placing orders relating to Investments on behalf of the Client with Brokers for execution by those Brokers, the Investment Adviser shall owe to the Client a duty to take all sufficient steps to obtain the best possible result for the Client, taking into account the Execution Factors that are relevant to the execution or placing of that order under the terms of the Investment Adviser’s order execution policy, which is attached to this Annex at Appendix A.

The Investment Adviser will summarise and make public on its website on an annual basis for each class of financial instrument in which it executes orders for, or on behalf of, the Client, the following information:

the top five execution venues in terms of trading volumes where it executed client orders in the preceding year; and

the quality of execution obtained.

The Investment Adviser shall, upon reasonable request from the Client, provide to the Client details of the Brokers to which orders are transmitted or Execution Venues where orders are placed for execution.

To the extent that the Investment Adviser places a Limit Order for the sale or purchase of equities on behalf of the Client with a Broker for execution by that Broker, the Client hereby expressly instructs the Investment Adviser not to make public (and to use reasonable endeavours to procure that the Broker does not make public) the details of that Limit Order unless the Investment Adviser considers, in its absolute discretion, that it is appropriate for such details to be made public (which shall, without limitation, be deemed to include where the relevant Broker makes the relevant details of that Limit Order public in circumstances where the Investment Adviser has given the Broker the discretion to do so).

In accordance with the FCA Rules the Investment Adviser shall provide the Client with a periodic statement (or shall procure that such a statement is provided to the Client by another person) on the Portfolio. Each periodic statement will include a fair and balanced review of the activities undertaken by the Investment Adviser and of the performance of the Portfolio during the reporting period.

Furthermore, the Investment Adviser will notify the Client where the overall value of the Portfolio, as evaluated at the beginning of each reporting period, depreciates by 10% and thereafter at multiples of 10%, by the end of the business day in which the threshold is exceeded. Where the threshold is exceeded on a non-business day, the Investment Adviser will notify the Client by the end of the next business day.

Under the FCA Rules, in the course of providing portfolio management services to the Client, the Investment Adviser is prohibited from accepting and retaining any fees, commission or monetary benefits, or accepting any non-monetary benefits (other than acceptable minor non-monetary benefits and research permitted under Clause 7.3), where these are paid or provided by any third party or a person acting on their behalf.

The Investment Adviser may accept and retain fees, commission or non-monetary benefits which are paid or provided to the Investment Adviser by a person acting on behalf of the Client, provided that person is aware that such payments have been made on the Client’s behalf and the amount and frequency of the payment is agreed between the Client and the Investment Adviser and not determined by a third party.

In the course of providing services to the Client the Investment Adviser may, to the extent permitted by the FCA Rules, accept certain minor non-monetary benefits including without limitation:

participation in conferences, seminars and other training events on the benefits and features of a specific financial instrument or an investment service; and

hospitality of a reasonable de minimis value, including food and drink during a business meeting or a conference, seminar or other training event specified at Clause 7.3(A).

In the case of each benefit specified under Clause 7.3, the Investment Adviser hereby confirms its view that the minor non-monetary benefit is:

capable of enhancing the quality of the service provided by the Investment Adviser to the Client;

of a scale and nature that it could not be judged to impair the Investment Adviser’s compliance with its duty to act honestly, fairly and professionally in the best interests of the Client; and

reasonable, proportionate and of a scale that is unlikely to influence the Investment Adviser’s behaviour in any way that is detrimental to the interests of the Client.

The Investment Adviser does not use research (as defined in the FCA Rules) received from third parties in connection with the provision of its services to the Client.

In the event research (as defined in the FCA Rules) is received by the Investment Adviser it will pay for such research directly from its own resources.

The Investment Adviser has in place a conflicts of interest policy, which is appended to this Annex at Appendix B, which specifies the procedures that it follows and the measures that it has adopted to identify, prevent or manage conflicts in a way that ensures fair treatment for the Client.

Further information on the Investment Adviser’s conflicts of interest policy is available on request.

The Investment Adviser hereby notifies the Client that, in certain circumstances, the organisational and administrative arrangements established by the Investment Adviser to prevent or manage a particular conflict may not be sufficient to ensure, with reasonable confidence, that the risk of damage to the interests of clients will be prevented. The Client acknowledges the contents of the of the conflicts of interest policy and in particular (a) the specific description of the conflicts of interest that arise or could arise in the provision of the Investment Adviser’s services and (b) the description of the risks to clients that arise as a result as the conflicts of interest and the steps undertaken to mitigate these risks to enable the Investment Adviser’s clients to take an informed decision with respect to its services in the context of which the conflicts of interest arise.

The Investment Adviser hereby notifies the Client that telephone and electronic communications and conversations between the Investment Adviser and the Client that result or may result in activities in financial instruments (as more particularly provided under the FCA Rules) will be recorded.

Records kept by the Investment Adviser in accordance with Clause 10.1 will be kept for a period of 5 years (or up to 7 years upon request from the FCA) and will be provided to the Client upon request.

The Investment Adviser has in operation a complaints management policy in accordance with the FCA Rules for the effective consideration and proper handling of complaints

Any complaints should be referred to the Chief Compliance Officer of the Investment Adviser.

The Client, as a professional client, has no right of complaint to the Financial Ombudsman Service in respect of any act or omission of the Investment Adviser which is or is alleged to be in breach of the FCA Rules.

FCA-regulated business conducted by the Investment Adviser pursuant to this Agreement is covered by the Financial Services Compensation Scheme to the extent that the Client is an “eligible claimant” (as defined in the FCA Rules). The Financial Services Compensation Scheme compensates eligible claimants for losses suffered as a result of the inability of an FCA-regulated firm to pay monies due, or satisfy obligations owed, to them (typically as a result of the firm’s insolvency). Compensation under the FSCS is subject to maximum limits.

In the event the Client has appointed multiple investment managers, investment advisers and/or sub-advisers to manage its assets, it acknowledges that it may be required to aggregate investments advised by such other investment managers, investment advisers and/or sub-advisers with Investments in the Portfolio for the purposes of certain regulatory and exchange-imposed position limits to which the Client may be subject. The Client acknowledges and agrees that it shall be solely responsible for compliance with any such position limits.

Personal Data of the Client’s and any Management Entity’s employees, officers, directors, trustees, partners and other related or affiliated persons may come into Winton’s possession in connection with this Agreement or otherwise in the course of such parties’ relationship with Winton. Winton will process such Personal Data in accordance with its privacy notice (as amended from time to time), the current version of which is published at www.winton.com. The Client and any Management Entity each warrant that disclosure of such Personal Data to Winton will only be made in compliance with applicable law and regulation.

Winton’s execution methodologies target a low participation rate. Based on Winton’s statistical research and empirical evidence, such behavior is expected to achieve fill prices which outperform less passive benchmarks over the long term.

Trade execution is algorithmically automated where appropriate to provide consistency with the broader principles of scientific investing and robust risk control.

Target positions are updated at least once per day with the ambition of completing all rebalancing trades the same day.

Daily trade and position caps are set as appropriate, and periodically reviewed, to control order size, liquidity consumption and concentration.

To seek to ensure Winton consistently obtains best execution, orders may be routed to a number of different venues or counterparties. The preferred venue or counterparty for a given order is a function of execution risk, operational and technical integration, liquidity, price, speed and any other factor determined by the order characteristics.

Winton may execute orders outside of a trading venue, directly with a counterparty; this will often be the case for Over the Counter (“OTC”) FX and cash fixed income securities. Execution of orders outside of a trading venue will carry additional counterparty risk.

Winton exercises discretion in determining the factors required to achieve the firm’s execution objectives and provide clients with optimal market access. Factors considered include speed, price, size, cost, likelihood of execution (“LOE”) and likelihood of settlement (“LOS”).

Winton does not have any close links or affiliations with executing brokers and does not participate in certain practices which could otherwise cause a conflict of interest or unduly influence execution selection, such as payment for order flow, “soft dollar” arrangements or new security listings; and Winton’s execution team is not rewarded through incentive-based arrangements (i.e. benchmark outperformance incentives).

Winton does not engage in cross trading, defined as the intentional purchase and sale of an instrument between two accounts managed/controlled by Winton.

Winton’s Execution team will monitor the effectiveness of the execution arrangements and assess on a regular basis whether the execution venues, brokers and execution styles selected provide best execution. The quality of execution is subject to additional oversight from respective Strategy Managers.

The Execution team produce reports for the consideration of the Strategy Managers, Compliance and Risk which measures performance with respect to the execution objectives.

Winton’s Compliance department is responsible for keeping senior management and the execution team informed about regulatory requirements to ensure all sufficient steps are taken to obtain best execution. The Compliance department is provided with access to sufficient data to conduct any additional monitoring to ensure adherence with this policy as part of the compliance monitoring program.

Winton seeks to negotiate commission rates which are normalised across its executing brokers, where feasible; thus explicit costs are broadly uniform and therefore not a high priority factor.

The likelihood of execution and settlement across the financial instruments traded by Winton are very high and therefore rarely have a material influence on execution selection. These factors may be elevated if bilateral limits for OTC trades or general operational issues with brokers are viewed by Winton to potentially compromise the workflow.

Winton trades liquid securities and controls market impact in a number of ways including imposing trade caps, and orders are typically modest relative to daily volumes.

For orders which are larger relative to market activity, size is a more influential factor on routing decisions. In such cases liquidity-seeking algorithms may be used and partial fills are more common. Such behavior is most prevalent trading cash equities.

Electronic limit orders may be directed to the market through Winton’s broker’s exchange membership, by a member of the execution team if, for example, algorithmic execution is not available. Such workflow is most common for smaller futures markets and spread orders.

Orders may be executed by requesting quotes directly from brokers or responding to indications of interest. This is standard for OTC markets but may also be pursued where electronic execution is available but it is deemed appropriate to source block liquidity directly from brokers. Winton aims to acquire (at least two) competing quotes and/or use independent sources for price discovery, but sensitivity to speed is higher in these cases to maintain integrity of synchronicity and avoiding undesirable market (time) risk.

Execution may target certain prices or time points, for example in the case of benchmarking or hedge rebalancing transactions.

The firm, including employees, non-executive directors or any person linked to the firm by control, and a client²; or

A client and another client.

Winton takes all reasonable steps to prevent conflicts of interest and has in place appropriate arrangements for when they cannot be prevented, as described below.

Winton takes all reasonable steps to identify conflicts of interest that arise or may arise in the course of providing its services to clients.

Winton maintains and regularly updates a record of the kinds of service or activity it carries out through which a conflict of interest has arisen or may arise.

Winton maintains and operates effective organisational and administrative arrangements that are designed to manage potential conflicts and to prevent material risk of damage to the interests of its clients. These include: an appropriate corporate governance structure; senior management oversight, management information and reporting; internal controls; independent Compliance and Risk functions; an Internal Audit function; and various firm-wide policies, including a Code of Ethics.

If arrangements made by Winton to manage conflicts are not sufficient to ensure with reasonable confidence that material risk of damage to the interests of a client will be prevented, Winton will disclose the conflict of interest to the client before undertaking business for that client.

Winton provides training to its employees on firm and personal conflicts annually.

Winton employees are required to report any firm conflict or perceived firm conflict of interest to Compliance.

Prior to engaging in any outside business interests that may give rise to a potential or actual conflict of interest, Winton employees must obtain approval from Compliance.

Winton employees are required to report to Compliance personal conflicts or potential personal conflicts, including but not limited to: