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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Fiscal Year Ended December 31, 2002
Commission File Number 333-88460
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to ______________________
QUADRIGA SUPERFUND, L.P. - SERIES A and SERIES B
------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 98-0375395
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
LE MARQUIS COMPLEX
UNIT 5
P.O. BOX 1479
GRAND ANSE
ST. GEORGE'S GRENADA
WEST INDIES
Registrant's telephone number, including area code: (473) 439-2418
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
-------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
----- -----
Indicate by check mark if the disclosure document of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part II of this Form 10-K or
any amendment to this Form 10-K. ______
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No X
----- -----
The Registrant has no voting stock. As of December 31, 2002 there were 1004.60
Units (Share Class A: 110.27 and Share Class B: 894.33) of Limited Partnership
Interest held by non-affiliates of the Registrant.
Total number of pages 37.
DOCUMENTS INCORPORATED BY REFERENCE
Prospectus dated October 22, 2002 as amended by Prospectus dated
October 31, 2002 included within the Registration Statement on Form S-1 (File
No. 333-88460), incorporated by reference into Parts I, II, III and IV.
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PART I
ITEM 1. BUSINESS
Quadriga Superfund, L.P. is a limited partnership which was organized
on May 3, 2002 under the Delaware Revised Uniform Limited Partnership Act, as
amended. In accordance with the Limited Partnership Agreement under which it
operates, Quadriga Superfund is organized as two separate series of limited
partnership units, Series A and Series B. The Registrant operates as a commodity
investment pool, whose purpose is speculative trading in the U.S. and
international futures and equity markets. Specifically, the Fund trades a
portfolio of approximately 100 futures markets using a fully automated
computerized trading system. The general partner and trading manager of the
Registrant is Quadriga Capital Management, Inc., a Grenada corporation. The
Registrant's operations are regulated by the provisions of the Commodity
Exchange Act, the regulations of the Commodity Futures Trading Commission, and
the rules of the National Futures Association.
The Registrant originally filed a registration statement with the U.S.
Securities and Exchange Commission for the sale of 200,000 Units of Limited
Partnership at $1,000 each, which registration statement was declared effective
on October 22, 2002. The Fund filed an amended registration statement on October
31, 2002 with the U.S. Securities and Exchange Commission to include certain
disclosures requested by specific states in which the Fund is selling Units. The
Unit selling price during the initial offering period, which ended on October
31, 2002, was $1,000. Since November 1, 2002, Units of Limited Partnership
Interests of the Fund have been offered on an ongoing basis during the Fund's
continuing offering period. During the continuing offering period, subscriptions
are accepted monthly and proceeds are transferred to bank and brokerage accounts
for trading purposes. The selling price per Unit during the continuing offering
period is the net asset value per Unit as of the last business day of the month
in which the subscription is accepted.
A total of $2,969,434 has been invested in the initial and continuing
offering periods through December 31, 2002.
In addition to making all trading decisions in its capacity as trading
manager, Quadriga Capital Management conducts and manages all aspects of the
business and administration of the Registrant in its role as general partner.
The Registrant will be terminated and dissolved promptly thereafter
upon the happening of the earlier of: (a) the expiration of the Registrant's
stated term of December 31, 2050; (b) an election to dissolve the Registrant at
any time by Limited Partners owning more than 50% of the Units then outstanding;
(c) the withdrawal of Quadriga Capital Management as general partner unless one
or more new general partners have been elected or appointed pursuant to the of
Limited Partnership Agreement; or (d) with respect to Series A and Series B
Units of Limited Partnership Interest, a decline in the aggregate net assets of
such a Series to less than $500,000 after commencement of trading.
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REGULATION
Under the Commodity Exchange Act, as amended (the "Act"), commodity
exchanges and commodity futures trading are subject to regulation by the
Commodity Futures Trading Commission (the "CFTC"). The National Futures
Association (the "NFA"), a registered futures association under the Act, is the
only non-exchange self-regulatory organization for commodity industry
professionals. The CFTC has delegated to the NFA responsibility for the
registration of "commodity trading advisors," "commodity pool operators,"
"futures commission merchants," "introducing brokers" and their respective
associated persons and "floor brokers." The Act requires "commodity pool
operators" such as Quadriga Capital Management and commodity brokers or "futures
commission merchants" such as the Registrant's commodity brokers to be
registered and to comply with various reporting and recordkeeping requirements.
Quadriga Capital Management and the Registrant's commodity brokers are members
of the NFA. The CFTC may suspend a commodity pool operator's registration if it
finds that its trading practices tend to disrupt orderly market conditions, or
as the result of violations of the Commodity Exchange Act or rules and
regulations promulgated thereunder. In the event Quadriga Capital Management's
registration as a commodity pool operator was terminated or suspended, Quadriga
Capital Management would be unable to continue to manage the business or the
Registrant. Should Quadriga Capital Management's registration be suspended,
termination of the Registrant might result.
In addition to such registration requirements, the CFTC and certain
commodity exchanges have established limits on the maximum net long and net
short positions which any person, including the Registrant, may hold or control
in particular commodities. Most exchanges also limit the maximum changes in
futures contract prices that may occur during a single trading day. The
Registrant also trades in dealer markets for forward and swap contracts, which
hare not regulated by the CFTC. Federal and state banking authorities also do
not regulate forward trading or forward dealers. In addition, the Registrant
trades on foreign commodity exchanges, which are not subject to regulation by
any United States government agency.
OPERATIONS
A description of the business of the Registrant, including trading
approach, rights and obligations of the Partners, and compensation arrangements
is contained in the Prospectus under "Summary," "The Risks You Face," "Quadriga
Capital Management, Inc.," "Conflicts of Interest," and "Charges to Each Series"
and such description is incorporated herein by reference from the Prospectus.
The Registrant conducts its business solely in the speculative trading
of futures and forward contracts and options thereon. The Registrant is a market
participant in the "managed futures" industry. Market participants include all
types of investors, such as corporations, employee benefit plans, individuals
and foreign investors. Service providers of the managed futures industry include
(a) pool operators, which conduct and manage all aspects of trading funds such
as the Registrant, (b) trading advisors, which make the specific
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trading decisions, and (c) commodity brokers, which execute and clear the trades
pursuant to the instructions of the trading advisor. The Registrant has no
employees, and does not engage in the sale of goods or services.
The Registrant trades in up to approximately 100 futures markets
contracts on domestic and international exchanges. The approximate, historical
allocation between market sectors is: currencies, 18%; livestock, 5%;
agricultural, 10%; metals, 10%; interest rate instruments, 12%; energies, 13%;
stock indices, 18%; and grains, 14%. Trading decisions are made using a fully
automated computerized trading system which emphasizes instruments with low
correlation and high liquidity for order execution. The particular contracts
traded by the Registrant will fluctuate from time to time.
The Registrant may, in the future, experience increased competition for
the commodity futures and other contracts in which it trades. Quadriga Capital
Management will recommend similar or identical trades for other accounts under
its management. Such competition may also increase due to what Quadriga Capital
Management believes is an increasing utilization of computerized trading methods
similar in general to those used by Quadriga Capital Management.
ITEM 2. PROPERTIES
The Registrant does not use any physical properties in the conduct of
its business. Its assets currently consist of futures and other contracts, cash
and U.S. Treasury Bills.
ITEM 3. LEGAL PROCEEDINGS
Quadriga Capital Management is not aware of any material legal
proceedings to which it or the Registrant is a party or to which any of their
assets are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Units of Limited Partnership Interest are not publicly traded. Units
may be transferred or redeemed subject to the conditions imposed by the
Agreement of Limited Partnership. As of December 31, 2002, there were 8 Limited
Partners in Series A of the Registrant and 32 Limited Partners in Series B and a
total of approximately 3,004.60 Units of Limited Partnership Interest
outstanding.
Quadriga Capital Management has sole discretion in determining what
distributions, if any, the Registrant will make to its Unit holders. Quadriga
Capital Management has not made any distributions as of the date hereof.
5
ITEM 6. SELECTED FINANCIAL DATA
DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS
- --------------------------------------------------------------------------------------------
SERIES A SERIES B
- --------------------------------------------------------------------------------------------
Total Net Assets 1,216,435.00 2,196,981.00
- --------------------------------------------------------------------------------------------
Total Income (loss) 158,074.00 467,159.00
- --------------------------------------------------------------------------------------------
Net Income (loss) 108,937.00 335,045.00
- --------------------------------------------------------------------------------------------
Net Income (loss) per Unit 98.12 176.87
- --------------------------------------------------------------------------------------------
Increase (Decrease) in Net Asset Value per Unit 95.62 159.77
- --------------------------------------------------------------------------------------------
Since the Registrant only operated during the months of November and December
during 2002, the above date also summarizes quarterly financial information
presenting results of operations for the fourth quarter of 2002.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS INTRODUCTION
The offering of its Units of Limited Partnership Interests commenced on
October 22, 2002. The initial offering terminated on October 31, 2002 and the
Fund commenced operations on November 5, 2002. The continuing offering period
commenced at the termination of the initial offering period and is ongoing.
CAPITAL RESOURCES
The Fund 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 Fund's business, it will
make no capital expenditures and will have no capital assets which are not
operating capital or assets.
LIQUIDITY
Most United States commodity 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 the
daily limit for several consecutive days with little or no trading. Similar
occurrences could prevent the Fund from promptly liquidating unfavorable
positions and subject the Fund 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 Fund 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 Fund's
futures trading operations, the Fund's assets are expected to be highly liquid.
6
CRITICAL ACCOUNTING POLICIES - VALUATION OF THE FUND'S POSITIONS
Quadriga Capital Management believes that the accounting policies that
will be most critical to the Fund's financial condition and results of
operations relate to the valuation of the Fund's positions. The majority of the
Fund's positions will be exchange-traded futures contracts, which will be valued
daily at settlement prices published by the exchanges. Any spot and forward
foreign currency contracts held by the Fund will also be valued at published
daily settlement prices or at dealers' quotes. Thus, Quadriga Capital Management
expects that under normal circumstances substantially all of the Fund's assets
will be valued on a daily basis using objective measures.
RESULTS OF OPERATIONS
Series A:
The return for the year ended December 31, 2002 was 9.6%. Of this 9.6% increase,
approximately 14.0% was due to trading gains (before commissions) and
approximately 0.1% was due to interest income, offset by approximately 4.5% due
to management fees, organization expenses, operating expenses, selling
commissions and incentive fees.
Series B:
The return for the year ended December 31, 2002 was 16.0%. Of this 16.0%
increase, approximately 23.2% was due to trading gains (before commissions) and
approximately 0.1% was due to interest income, offset by approximately 7.3% due
to management fees, organization expenses, operating expenses, selling
commission and incentive fees.
Fund Results for November 2002:
The fund started trading on November 5, 2002 with invested capital of
US$ 2,372,998 in Series A and B combined (Series A: $1,032,998 and Series B:
$1,340,000. The fund opened, based on a long-term bearish trend in equity
markets, by establishing short positions in most stock indices globally (United
States and abroad) which resulted in moderate losses for the month of November
due to continued upward movement which began in October 2002. In addition, long
positions in Bonds resulted in moderate losses.
New short positions in the U.S. Dollar vis-a-vis other currencies
resulted in flat performance for the month due to the absence of a clear trend
definition.
Long positions in the energy sector (crude oil, natural gas) showed
modest gains due to increased tension concerning the political situation in
Iraq.
The best performance for the month of November resulted from long
positions in the commodities market (coffee, sugar, zinc, lead and copper).
7
On balance, the Fund had negative performance in the month of November
with Series A losing 3.6 % and Series B posting a loss of 5.8%.
Fund Results for December 2002:
Most positions established during November were continued into
December. Stock Indices moved lower in all major markets due to increased
tension in the Middle East and the potential of war in Iraq.
The U.S. Dollar lost more ground to the Euro which resulted in a three
year low of the U.S. Dollar versus the Euro. In addition, the Japanese Yen also
gained against the Dollar and most positions within the currency sector
performed extremely well for the Fund.
Energy prices saw a rally in December due to the looming war and the
cold winter in many parts of the United States resulting in much lower
inventories than anticipated. The volatility of these markets increased
dramatically.
The only losing positions for the month came from coffee and corn as
well as some of the metals (with the exception of gold and silver).
The Fund had exceptionally good performance in December. Series A
posted a gain of 13.6% whereas Series B posted a gain of 23.2%.
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 Fund 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
market risk that such contracts may be significantly influenced by 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 Fund at the same time, and if Quadriga Capital Management was
unable to offset such positions, the Fund could experience substantial losses.
Quadriga Capital Management attempts to minimize market risk through real-time
monitoring of open positions, diversification of the portfolio and maintenance
of a margin-to-equity ratio in all but extreme instances not greater than 50%.
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 Fund. 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.
8
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. Quadriga Capital Management
trades for the Fund only with those counterparties which it believes to be
creditworthy. All positions of the Fund 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 Fund.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTRODUCTION
Past Results Not Necessarily Indicative of Future Performance
The Fund is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all or
a substantial amount of the Fund's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Fund's main line of business.
Market movements can produce frequent changes in the fair market value
of the Fund's open positions and, consequently, in its earnings and cash flow.
The Fund's market risk is influenced by a wide variety of factors, including the
level and volatility of exchange rates, interest rates, equity price levels, the
market value of financial instruments and contracts, the diversification effects
among the Fund's open positions and the liquidity of the markets in which it
trades.
The Fund rapidly acquires and liquidates both long and short positions
in a wide range of different markets. Consequently, it is not possible to
predict how a particular future market scenario will affect performance, and the
Fund's past performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Fund could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Fund's speculative trading and the recurrence in the markets
traded by the Fund of market movements far exceeding expectations could result
in actual trading or non-trading losses far beyond the indicated Value at Risk
or the Fund's experience to date (i.e., "risk of ruin"). In light of this, as
well as the risks and uncertainties intrinsic to all future projections, the
inclusion of the quantification included in this section should not be
considered to constitute any assurance or representation that the Fund's losses
in any market sector will be limited to Value at Risk or by the Fund's attempts
to manage its market risk.
Standard of Materiality
Materiality as used in this section, "Qualitative and Quantitative
Disclosures About Market Risk," is based on an assessment of reasonably possible
market movements and the
9
potential losses caused by such movements, taking into account the leverage, and
multiplier features of the Fund's market sensitive instruments.
QUANTIFYING THE FUND'S TRADING VALUE AT RISK
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Fund's market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of historical
fact (such as the dollar amount of maintenance margin required for market risk
sensitive instruments held at the end of the reporting period).
The Fund's risk exposure in the various market sectors traded by
Quadriga Capital Management is quantified below in terms of Value at Risk. Due
to the Fund's mark-to-market accounting, any loss in the fair value of the
Fund's open positions is directly reflected in the Fund's earnings (realized or
unrealized).
Exchange maintenance margin requirements have been used by the Fund as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current
market volatility and economic fundamentals to provide a probabilistic estimate
of the maximum expected near-term one-day price fluctuation.
In the case of market sensitive instruments which are not
exchange-traded (which includes currencies and some energy products and metals
in the case of the Fund), the margin requirements for the equivalent futures
positions have been used as Value at Risk. In those cases in which a
futures-equivalent margin is not available, dealers' margins have been used.
In the case of contracts denominated in foreign currencies, the Value
at Risk figures include foreign margin amounts converted into U.S. Dollars with
an incremental adjustment to reflect the exchange rate risk inherent to the
Dollar-based Fund in expressing Value at Risk in a functional currency other
than Dollars.
In quantifying the Fund's Value at Risk, 100% positive correlation in
the different positions held in each market risk category has been assumed.
Consequently, the margin requirements applicable to the open contracts have
simply been aggregated to determine each trading category's aggregate Value at
Risk. The diversification effects resulting from the fact that the Fund's
positions are rarely, if ever, 100% positively correlated have not been taken
into account.
10
THE FUND'S TRADING VALUE AT RISK IN DIFFERENT MARKET SECTORS
The following tables indicate the trading Value at Risk associated with
the Fund's open positions by market category as of December 31, 2002 and the
trading gains/losses by market category for the year then ended. All open
position trading risk exposures of the Fund have been included in calculating
the figures set forth below. As of December 31, 2002, the Fund's net asset value
was approximately $3,413,416.
SERIES A:
- --------------------------------------------------------------------------------
SECTOR VALUE AT RISK (USD) % OF TOTAL CAPITALIZATION
(NET ASSETS)
- --------------------------------------------------------------------------------
Agricultural Products 29,723 2.44
- --------------------------------------------------------------------------------
Metals 57,296 4.71
- --------------------------------------------------------------------------------
Energy 58,578 4.82
- --------------------------------------------------------------------------------
SERIES B:
- --------------------------------------------------------------------------------
SECTOR VALUE AT RISK (USD) % OF TOTAL CAPITALIZATION
(NET ASSETS)
- --------------------------------------------------------------------------------
Agricultural Products 76,148 3.47
- --------------------------------------------------------------------------------
Metals 131,180 5.97
- --------------------------------------------------------------------------------
Energy 174,929 7.96
- --------------------------------------------------------------------------------
MATERIAL LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK
The face value of the market sector instruments held by the Fund is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally ranging between approximately 1% and 10% of
contract face value) as well as many times the capitalization of the Fund. The
magnitude of the Fund's open positions creates a "risk of ruin" not typically
found in most other investment vehicles. Because of the size of its positions,
certain market conditions -- unusual, but historically recurring from time to
time -- could cause the Fund to incur severe losses over a short period of time.
The foregoing Value at Risk tables -- as well as the past performance of the
Fund -- give no indication of this "risk of ruin."
NON-TRADING RISK
The Fund has non-trading market risk on its foreign cash balances not
needed for margin. However, these balances (as well as the market risk they
represent) are immaterial. The Fund also has non-trading market risk as a result
of investing a substantial portion of its
11
available assets in U.S. Treasury Bills. The market risk represented by these
investments is immaterial.
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES
The following qualitative disclosures regarding the Fund's market risk
exposures -- except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Fund manages its primary market risk
exposures -- constitute forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act. The
Fund's primary market risk exposures as well as the strategies used and to be
used by Quadriga Capital Management for managing such exposures are subject to
numerous uncertainties, contingencies and risks, any one of which could cause
the actual results of the Fund's risk controls to differ materially from the
objectives of such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant fundamental factors,
political upheavals, changes in historical price relationships, an influx of new
market participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
risk management strategies of the Fund. There can be no assurance that the
Fund's current market exposure and/or risk management strategies will not change
materially or that any such strategies will be effective in either the short- or
long-term. Investors must be prepared to lose all or substantially all of their
investment in the Fund.
The following were the primary trading risk exposures of the Fund as of
December 31, 2002, by market sector.
Currencies
The Fund's currency exposure is to exchange rate those, primarily
fluctuations which disrupt the historical pricing relationships between
different currencies and currency pairs. These fluctuations are influenced by
interest rate changes as well as political, geopolitical and general economic
conditions. The Fund trades in a large number of currencies, including
cross-rates, (e.g. positions between two currencies other than the U.S. Dollar).
Quadriga Capital Management does not anticipate that the risk profile of the
Fund's currency sector will change significantly in the future. As of December
31, 2002, the fund had no exposure to the currency market based on open
positions on such date
Interest Rates
Interest rate movements directly affect the price of the sovereign bond
positions held by the Fund and indirectly the value of the Fund's stock index
and currency positions. Interest rate movements in one country as well as
relative interest rate movements between countries could materially impact the
Fund's profitability. The Fund's primary interest rate exposure is to interest
rate fluctuations in the United States, Europe, United Kingdom, Australia and
Japan. The changes in interest rates which have the most effect on the Fund are
changes in long-term as opposed to short-term rates. As of December 31, 2002,
the fund had no exposure to the interest rate market based on open positions on
such date.
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Stock Indices
Generally, the Fund's primary exposure is to the equity price risk in
the G-7 countries and certain other countries with high liquidity (Taiwan, Hong
Kong, Switzerland and Spain). The Fund is primarily exposed to the risk of
adverse price trends or static markets in these countries. Static markets would
not cause major price changes but would make it difficult for the Fund to avoid
being "whipsawed" into numerous smaller losses. As of December 31, 2002, the
fund had no exposure to stock indices based on open positions on such date.
Energy
The Fund's primary energy market exposure is to crude oil, natural gas
and heating oil. Movements in these markets are often due to geopolitical
developments in the Middle East but can also be caused by shortage due to
extreme weather conditions. As of December 31, 2002, energy exposure was the
greatest among all market sections.
Metals
The Fund's metals market exposure derives primarily from fluctuations
in the price of gold, silver, platinum, copper, zinc, nickel and aluminum. These
markets represent a great diversification in terms of correlation to many of the
other sectors the Fund trades. The exposure to these markets as of December 31,
2002 was relatively high in comparison to historic levels due to profit taking
in other positions.
Agricultural Market
The Fund's agricultural market exposure is completed to fluctuations in
the price of cocoa, sugar, coffee, cotton, lean hogs and live cattle. These
markets represent a great diversification in terms of correlation to many of the
other sectors the Fund trades. Although liquidity in these markets is not as
high as in some of the other sectors, the exposure to these markets as of
December 31, 2002 was relatively high in comparison to historic levels due to
profit taking in other positions.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following were the only non-trading risk exposures of the Fund as
of December 31, 2002.
Foreign Currency Balances
The Fund's primary foreign currency balances are in the G-7 countries
along with Spain and Asian markets. The Fund controls the non-trading risk of
these balances by regularly converting these balances back into dollars (no less
frequently than weekly, and more frequently if a particular foreign currency
balance becomes unusually large based on Quadriga Capital Management's
experience).
13
Treasury Bill Positions
The Fund's only market exposure in instruments held other than for
trading is in its Treasury Bill portfolio. The Fund holds Treasury Bills
(interest bearing and credit risk-free) with durations no longer than six
months. Substantial or sudden fluctuations in prevailing interest rates could
cause immaterial mark-to-market losses on the Fund's Treasury Bills, although
substantially all of these short-term investments are held to maturity.
QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE
The means by which the Fund and Quadriga Capital Management, severally,
attempt to manage the risk of the Fund's open positions is essentially the same
in all market categories traded. Quadriga Capital Management applies risk
management policies to its trading which generally limit the total exposure that
may be taken per "risk unit" of assets under management. In addition, Quadriga
Capital Management follows diversification guidelines (often formulated in terms
of the balanced volatility between markets and correlated groups), as well as
imposing "stop-loss" points at which the Fund's brokers must attempt to close
out open positions.
Quadriga Capital Management controls the risk of the Fund's non-trading
instruments (Treasury Bills held for cash management purposes) by limiting the
duration of such instruments to no more than six months.
GENERAL
The Fund is unaware of any (i) anticipated known demands, commitments
or capital expenditures; (ii) material trends, favorable or unfavorable, in its
capital resources; or (iii) trends or uncertainties that will have a material
effect on operations. From time to time, certain regulatory agencies have
proposed increased margin requirements on futures contracts. Because the Fund
generally will use a small percentage of assets as margin, the Fund does not
believe that any increase in margin requirements, as proposed, will have a
material effect on the Fund's operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements meeting the requirements of Regulation S-X appear
beginning on page A-1 of this report. The supplementary financial information
specified by Item 302 of Regulation S-K is included in Item 6. Selected
Financial Data.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
14
PART II
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The Registrant has no directors or executive officers. The Registrant
has no employees. It is managed by Quadriga Capital Management in its capacity
as general partner. Quadriga Capital Management has been registered with the
Commodity Futures Trading Commission as a commodity pool operator since May
2001. Its main business address is Le Marquis Complex, Unit 5, P.O. Box 1479,
Grand Anse, St. George's, Grenada, West Indies, (473) 439-2418. Quadriga Capital
Management's directors and executive officers are as follows:
CHRISTIAN BAHA is Quadriga Capital Management's President and founder.
He is a graduate of the police academy in Vienna, Austria and a student of the
Business University of Vienna, Austria. Mr. Baha started a business with
Christian Halper in 1991 to develop and market financial software applications
to institutions in Austria. From that development, two independent companies
were formed: Teletrader.com Software AG and Quadriga Beteiligungs - und
Vermogens AG. Teletrader.com is a publicly-held company that offers financial
software products for institutions and is listed on the Austria Stock Exchange.
Quadriga Beteiligungs - und Vermogens AG was founded in 1995. Mr. Baha resides
in Monte Carlo where he directs the strategic worldwide expansion of the
Quadriga group of companies.
GERHARD ENTZMANN is Quadriga Capital Management's secretary and has
been associated with the company since 2001. He has been involved in managing
Quadriga Capital Management's fund management business for U.S. products. Mr.
Entzmann received a degree in mechanical engineering from the University of
Vienna and in June 2001 he received his doctor's degree. He was a research
assistant at the Institute for Internal Combustion Engines and Vehicle
Engineering at the Technical University of Vienna from 1994 to 2001. Mr.
Entzmann has a strong background in data analysis and systems engineering.
There has never been a material administrative, civil or criminal
action brought against Quadriga Capital Management or any of its directors,
executive officers, promoters or control persons.
Quadriga Capital Management has previously filed a Form 5 with the U.S.
Securities and Exchange Commission with respect to its ownership interest of
Units in the Registrant.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant is managed by its general partner, Quadriga Capital
Management. Quadriga Capital Management receives a monthly management fee of
1/12 of 1.85% (1.85% annually) and a monthly fee of 25% of the aggregate
cumulative appreciation (if any) in Net Asset Value per unit at the end of each
month, exclusive of appreciation attributable to interest income.
15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners. As of December
31, 2002, no Units of Limited Partnership were owned or held by
an officer of Quadriga Capital Management.
(b) Security Ownership of Management. As of December 31, 2002,
Quadriga Capital Management owned 1,000 Units of Series A and
1,000 Units of Series B having a combined value of $2,255,390 .
Units of General Partnership Interest will be owned by Quadriga
Capital Management as an investment and in its capacity as
general partner.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 11, Executive Compensation and Item 12, Security Ownership of
Certain Beneficial Owners and Management.
16
PART IV
ITEM 14. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of
Quadriga Capital Management have concluded that the Fund has effective
disclosure controls and procedures to ensure that material information relating
to the Fund is made known to them by others within the Fund, particularly during
the period in which this annual report is being prepared. The principal
executive officer and principal financial officer of Quadriga Capital Management
have evaluated the effectiveness of the Fund's disclosure controls and
procedures as of a date within ninety (90) days prior to the filing date of this
annual report (the "Evaluation Date") and have based the foregoing conclusion
about the effectiveness of the Fund's disclosure controls and procedures based
on their evaluation as of the Evaluation Date.
During the period covered by this annual report, there have been no
significant changes in the Fund's internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The Following documents are filed as part of this report:
(1) See Financial Statements beginning on page A-1 hereof.
(2) Schedules:
Financial statement schedules have been omitted because they
are not included in the financial statements or notes hereto
applicable or because equivalent information has been
included in the financial statements or notes thereto.
(3) The exhibits listed in the "Index to Exhibits."
(b) Reports on Form 8-K
None.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized on March 28, 2003.
QUADRIGA SUPERFUND, L.P.
By: QUADRIGA CAPITAL MANAGEMENT, INC.
General Partner
By: /s/ Christian Baha
----------------------------------
Christian Baha
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on March 28, 2003.
Signature Capacity
--------- --------
/s/ Christian Baha
- ----------------------------- President
Christian Baha
/s/ Gerhard Entzmann
- ----------------------------- Secretary
Gerhard Entzmann
18
CERTIFICATION
I, Christian Baha, the chief executive officer of Quadriga Superfund, L.P.,
certify that:
1. I have reviewed this annual report on Form 10-K of Quadriga Superfund,
L.P.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 28, 2003
/s/ Christian Baha
Chief Executive Officer
CERTIFICATION
I, Gerhard Entzmann, the chief financial officer of Quadriga Superfund, L.P.,
certify that:
1. I have reviewed this annual report on Form 10-K of Quadriga Superfund,
L.P.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 28, 2003
/s/ Gerhard Entzmann
Chief Financial Officer
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 2002
A-1
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
CONTENTS
- --------------------------------------------------------------------------------
AFFIRMATION OF THE COMMODITY POOL OPERATOR A-3
INDEPENDENT AUDITORS' REPORT A-4
FINANCIAL STATEMENTS
Statements of Assets and Liabilities A-5
Condensed Schedules of Investments A-6 - 7
Statements of Operations A-8
Statements of Changes in Net Assets A-9
Statements of Cash Flows A-10
Notes to Financial Statements A-11 - 16
A-2
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
AFFIRMATION OF THE COMMODITY POOL OPERATOR
--------------
To the best of the knowledge and belief of the undersigned, the information
contained in the annual report for the period from November 5, 2002
(commencement of operations) through December 31, 2002 is accurate and complete.
/s/ Gerhard Entzmann
---------------------------------------
Gerhard Entzmann, Vice President of
Quadriga Capital Management, Inc., the
General Partner of Quadriga Superfund, L.P. - Series A and B
Commodity Pool Operator:
Quadriga Capital Management, Inc.
P.O. Box 1479
Grand Anse, St. George's
Grenada W.I.
(473) 439-2418
Commodity Pool:
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
A-3
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
Independent Auditors' Report
The Partners
Quadriga Superfund L.P. - Series A and B:
We have audited the accompanying statements of assets and liabilities of
Quadriga Superfund, L.P. - Series A and Series B (the Fund), including the
condensed schedules of investments as of December 31, 2002, and the related
statements of operations, changes in net assets and cash flows for the period
from November 5, 2002 (commencement of operations) through December 31, 2002.
These financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quadriga Superfund, L.P. -
Series A and Series B as of December 31, 2002 and the results of its operations,
and its cash flows for the period from November 5, 2002 (commencement of
operations) through December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
March 7, 2003
A-4
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2002
- --------------------------------------------------------------------------------
SERIES A SERIES B
ASSETS
US GOVERNMENT SECURITIES, at market
(Series A cost $944,085, Series B cost $1,540,776) $ 945,098 $1,542,197
NET EQUITY IN FUTURES CONTRACTS 68,338 192,020
DUE FROM BROKER 816,407 1,152,562
CASH 402,631 396,680
---------- ----------
Total assets 2,232,474 3,283,459
---------- ----------
LIABILITIES
ADVANCE CAPITAL CONTRIBUTIONS 972,745 961,768
FEES PAYABLE 43,294 124,710
---------- ----------
Total liabilities 1,016,039 1,086,478
---------- ----------
NET ASSETS $1,216,435 $2,196,981
========== ==========
NUMBER OF SHARES 1,110.275 1,894.331
========== ==========
NET ASSETS VALUE PER SHARE $ 1,095.62 $ 1,159.77
========== ==========
See accompanying notes to financial statements.
A-5
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2002
- --------------------------------------------------------------------------------
FACE VALUE PERCENTAGE MARKET OR
OF NET ASSETS UNREALIZED
SERIES A
INVESTMENTS IN SECURITIES, AT MARKET
DEBT SECURITIES
UNITED STATES
United States Treasury Bills due May 29, 2003
(cost $944,085), securities are held in margin
accounts as collateral for open futures
and forward contracts $950,000 77.7% $945,098
==== ========
FUTURES AND FORWARD CONTRACTS, AT UNREALIZED
SECTOR
ENERGY
Futures contracts purchased 3.3% $ 40,276
--- --------
GRAINS
Futures contracts purchased 0.1 731
Futures contracts sold (0.2) (2,368)
--- --------
TOTAL GRAINS (0.1) (1,637)
--- --------
LIVESTOCK
Futures contracts purchased 0.3 3,180
--- --------
METALS
Futures contracts purchased 2.9 35,700
Futures contracts sold 0.1 900
--- --------
Total futures contracts 3.0 36,600
--- --------
Unrealized appreciation on forward contracts 0.1 986
Unrealized depreciation on forward contracts (0.6) (7,644)
--- --------
Total forward contracts (0.5) (6,658)
--- --------
TOTAL METALS 2.5 29,942
--- --------
SOFTS
Futures contracts sold (0.3) (3,423)
--- --------
TOTAL FUTURES AND FORWARD CONTRACTS, AT UNREALIZED 5.7 $ 68,338
=== ========
FUTURES AND FORWARD CONTRACTS BY COUNTRY COMPOSITION
JAPAN 2.2 26,536
UNITED KINGDOM 0.7 8,142
UNITED STATES 2.8 33,660
--- --------
TOTAL FUTURES AND FORWARD CONTRACTS BY COUNTRY 5.7 $ 68,338
=== ========
See accompanying notes to financial statements.
A-6
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)
================================================================================
DECEMBER 31, 2002
- --------------------------------------------------------------------------------
FACE PERCENTAGE OF MARKET OR
VALUE NET ASSETS UNREALIZED
SERIES B
INVESTMENTS IN SECURITIES, AT MARKET
DEBT SECURITIES
UNITED STATES
United States Treasury Bills due May 29, 2003 (cost $1,540,776),
securities are held in margin accounts as collateral for open
futures and forward contracts $1,550,000 70.2% $1,542,197
====== ==========
FUTURES AND FORWARD CONTRACTS, AT UNREALIZED
SECTOR
ENERGY
Futures contracts purchased 5.5% $ 120,786
------ ----------
GRAINS
Futures contracts purchased - 676
Futures contracts sold (0.3) (6,308)
------ ----------
TOTAL GRAINS (0.3) (5,632)
------ ----------
LIVESTOCK
Futures contracts purchased 0.4 8,820
------ ----------
METALS
Futures contracts purchased 4.2 92,818
Futures contracts sold 0.1 2,286
------ ----------
Total futures contracts 4.3 95,104
------ ----------
Unrealized appreciation on forward contracts 0.3 7,562
Unrealized depreciation on forward contracts (1.2) (25,854)
------ ----------
Total forward contracts (0.9) (18,292)
------ ----------
TOTAL METALS 3.5 76,812
------ ----------
SOFTS
Futures contracts sold (0.4) (8,951)
------ ----------
INDICES
Futures contracts purchased - 185
------ ----------
TOTAL FUTURES AND FORWARD CONTRACTS, AT UNREALIZED 8.7% $ 192,020
====== ==========
FUTURES AND FORWARD CONTRACTS BY COUNTRY COMPOSITION
JAPAN 3.0% $ 66,227
UNITED KINGDOM 1.0 22,307
UNITED STATES 4.7 103,486
------ ----------
TOTAL FUTURES AND FORWARD CONTRACTS BY COUNTRY 8.7% $ 192,020
====== ==========
See accompanying notes to financial statements.
A-7
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
STATEMENTS OF OPERATIONS
================================================================================
PERIOD FROM NOVEMBER 5, 2002 (COMMENCEMENT OF OPERATIONS) THROUGH
DECEMBER 31, 2002
- --------------------------------------------------------------------------------
SERIES A SERIES B
INVESTMENT INCOME, interest $ 1,100 $ 1,543
--------- ---------
EXPENSES
Management fee 3,486 5,536
Organization costs 1,885 2,993
Operating expenses 282 449
Selling commission 7,538 11,969
Incentive fee 35,946 111,167
--------- ---------
Total expenses 49,137 132,114
--------- ---------
NET INVESTMENT INCOME (LOSS) (48,037) (130,571)
--------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on futures contracts 88,636 273,596
Net change in unrealized appreciation on futures
contracts 68,338 192,020
--------- ---------
NET GAIN (LOSS) ON INVESTMENTS 156,974 465,616
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 108,937 $ 335,045
--------- ---------
See accompanying notes to financial statements.
A-8
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
PERIOD FROM NOVEMBER 5, 2002 (COMMENCEMENT OF OPERATIONS) THROUGH
DECEMBER 31, 2002
- --------------------------------------------------------------------------------
SERIES A SERIES B
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) $ (48,037) $ (130,571)
Net realized gain (loss) on futures contracts 88,636 273,596
Net change in unrealized appreciation on futures contracts 68,338 192,020
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 108,937 335,045
CAPITAL SHARE TRANSACTIONS
Issuance of shares 1,107,498 1,861,936
----------- -----------
NET ASSETS, end of period $ 1,216,435 $ 2,196,981
=========== ===========
See accompanying notes to financial statements.
A-9
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
STATEMENTS OF CASH FLOWS
================================================================================
PERIOD FROM NOVEMBER 5, 2002 (COMMENCEMENT OF OPERATIONS) THROUGH
DECEMBER 31, 2002
- --------------------------------------------------------------------------------
SERIES A SERIES B
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase (decrease) in net assets from operations $ 108,937 $ 335,045
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
US Government securities (945,098) (1,542,197)
Due from brokers (816,407) (1,152,562)
Net equity in futures and forward contracts (68,338) (192,020)
Fees payable 43,294 124,710
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,677,612) (2,427,024)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Capital contributions, net of change in
advance capital contributions 2,080,243 2,823,704
----------- -----------
NET INCREASE (DECREASE) IN CASH 402,631 396,680
CASH, beginning of period - -
----------- -----------
CASH, end of period $ 402,631 $ 396,680
=========== ===========
See accompanying notes to financial statements.
A-10
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. NATURE OF OPERATIONS
Organization and Business
Quadriga Superfund, L.P. (the "Fund"), a Delaware Limited Partnership, commenced
operations on November 5, 2002. The Fund was organized to trade speculatively in
the United States of America and International commodity equity markets using a
strategy developed by Quadriga Capital Management, Inc., the General Partner and
Trading Manager of the Fund. The Fund has issued two classes of Units, Series A
and Series B.
The term of the Fund shall continue until December 31, 2050, unless terminated
earlier by the General Partner or by operation of the law or a decline in the
aggregate net assets of such series to less than $500,000.
2. SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments in Futures and Forward Contracts
All commodity interests (including derivative financial instruments and
derivative commodity instruments) are used for trading purposes. The commodity
interests are recorded on trade date basis and open contracts are recorded in
the statements of assets and liabilities at fair value on the last business day
of the year, which represents market value for those commodity interests for
which market quotes are readily available.
The average fair value for the period from November 5, 2002 (commencement of
operations) through December 31, 2002 was $28,492 and $80,943 for Series A and
Series B, respectively.
Translation of Foreign Currency
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollar amounts at the year end exchange rates. Purchases and sales of
investments, and income and expenses, that are denominated in foreign
currencies, are translated into U.S. dollar amounts on the transaction date.
Adjustments arising from foreign currency transactions are reflected in the
statements of operations.
The Fund does not isolate that portion of the results of operations arising from
the effect of changes in foreign exchange rates on investments from fluctuations
from changes in market prices of investments held. Such fluctuations are
included in net gain (loss) on investments in the statements of operations.
A-11
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
NOTES TO FINANCIAL STATEMENTS
================================================================================
Investment Transactions and Related Investment Income
Investment transactions are accounted for on a trade-date basis. Interest is
recognized on the accrual basis.
Income Taxes
The Fund does not record a provision for income taxes because the partners
report their share of the Fund's income or loss on their income tax returns. The
financial statements reflect the Fund's transactions without adjustment, if any,
required for income tax purposes.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the General Partner
to make estimates and assumptions that affect the amounts disclosed in the
financial statements. Actual results could differ from those estimates.
3. DUE FROM BROKERS
Amounts due from brokers may be restricted to the extent that they serve as
deposits for securities sold short.
In the normal course of business, all of the Fund's securities transactions,
money balances and security positions are transacted with brokers. The Fund is
subject to credit risk to the extent any broker with which it conducts business
is unable to fulfill contractual obligations on its behalf. The General Partner
monitors the financial condition of such brokers and does not anticipate any
losses from these counterparties.
4. ALLOCATION OF NET PROFITS AND LOSSES
In accordance with the Limited Partnership Agreement, net profits and losses of
the Fund are allocated to partners according to their respective interests in
the Fund as of the beginning of each month.
A-12
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
================================================================================
NOTES TO FINANCIAL STATEMENTS
Advance capital contributions represent cash received prior to December 31, 2002
for January contributions of the subsequent year and do not participate in the
earnings of the Fund until January 1, 2003.
5. RELATED PARTY TRANSACTIONS
In accordance with the Limited Partnership Agreement, Quadriga Capital
Management, Inc., the General Partner shall be paid a monthly management fee
equal to one-twelfth of 1.85% (1.85% per annum), a monthly organization and
offering fee equal to one-twelfth of 1% (1% per annum), and monthly operating
expenses equal to one-twelfth of .15% (.15% per annum), of the month end net
asset value of the fund. In accordance with the Prospectus dated October 31,
2002 Part One-Disclosure Document, Quadriga Asset Management, Inc., shall be
paid monthly selling commissions equal to one-twelfth of 4% (4% per annum), of
the month end net asset value of the Fund.
The General Partner will also be paid a monthly performance/incentive fee equal
to 25% of the new appreciation without respect to interest income. Trading
losses will be carried forward and no further performance/incentive fee may be
paid until the prior losses have been recovered.
A-13
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
NOTES TO FINANCIAL STATEMENTS
================================================================================
6. FINANCIAL HIGHLIGHTS
Financial highlights for the period November 5, 2002 (commencement of
operations) through December 31, 2002 are as follows:
SERIES A SERIES B
Total return
Total return before incentive fees 12.8% 21.9%
Incentive fees (3.2) (5.9)
--------- ---------
Total return after incentive fees 9.6% 16.0%
========= =========
Ratio to average partners' capital
Operating expenses before incentive fees 1.2% 1.0%
Incentive fees 3.2 6.4
--------- ---------
Total expenses 4.4% 7.4%
========= =========
Net investment income (loss) (4.3)% (7.4)%
========= =========
Net asset value per unit, beginning of period $1,000.00 $1,000.00
--------- ---------
Per unit operating performance
Net investment income (loss) (43.66) (70.54)
Net gain (loss) on investments 139.28 230.31
--------- ---------
Net increase in net assets from operations 95.62 159.77
--------- ---------
Net asset value per unit, end of period $1,095.62 $1,159.77
========= =========
Financial highlights are calculated for each series taken as a whole. An
individual partner's return and ratios may vary based on the timing of capital
transactions.
A-14
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
NOTES TO FINANCIAL STATEMENTS
================================================================================
7. FINANCIAL INSTRUMENT RISK
In the normal course of its business the Fund is party to financial instruments
with off-balance sheet risk, including derivative financial instruments and
derivative commodity instruments. These financial instruments may include
forwards, futures and options, whose values are based upon an underlying asset,
index, or reference rate, and generally represent future commitments to exchange
currencies or cash flows, to purchase or sell other financial instruments at
specific terms at specific future dates, or, in the case of derivative commodity
instruments, to have a reasonable possibility to be settled in cash, through
physical delivery or with another financial instrument. These instruments may be
traded on an exchange or over-the-counter ("OTC"). Exchange traded instruments
are standardized and include futures and certain option contracts. OTC contracts
are negotiated between contracting parties and include forwards and certain
options. Each of these instruments is subject to various risks similar to those
related to the underlying financial instruments including market and credit
risk. In general, the risks associated with OTC contracts are greater than those
associated with exchange traded instruments because of the greater risk of
default by the counter party to an OTC contract.
Market risks is the potential for changes in the value of the financial
instruments traded by the Fund due to market changes, including interest and
foreign exchange rate movements and fluctuations in commodity of security
prices. Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of a
counter party to perform according to the terms of a contract. Credit risk with
respect to exchange-traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counter party to the transactions. The Fund's
risk of loss in the event of counter party default is typically limited to the
amounts recognized in the statements of assets and liabilities and not
represented by the contract or notional amounts of the instruments. The Fund has
credit risk and concentration risk because the brokers with respect to the
Fund's assets are ADM Investor Services Inc., FIMAT USA Inc., and Man Financial.
The General Partner monitors and controls the Fund's risk exposure on a daily
basis through financial, credit and risk management monitoring systems, and
accordingly believes that it has effective procedures for evaluating and
limiting the credit and market risks to which the Fund is subject. These
monitoring systems allow the Fund's General Partner to statistically analyze
actual trading results with risk adjusted performance indicators and correlation
statistics. In addition, on-line monitoring systems provide account analysis of
futures and forward positions by sector, margin requirements, gain and loss
transactions and collateral positions.
A-15
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
NOTES TO FINANCIAL STATEMENTS
================================================================================
The majority of these instruments mature within one year of December 31, 2002.
However, due to the nature of the Fund's business, these instruments may not be
held to maturity.
8. SUBSCRIPTIONS AND REDEMPTIONS
Investors must submit subscriptions at least five business days prior to the
applicable month-end closing date and they will be accepted once payments are
received and cleared. All subscriptions funds are required to be promptly
transmitted to HSBC Bank USA (the "Escrow Agent"). Subscriptions must be
accepted or rejected by Quadriga Capital Management, Inc. within five business
days of receipt, and the settlement date for the deposit of subscription funds
in escrow must be within five business days of acceptance. No fees or costs will
be assessed on any subscription while held in escrow, irrespective of whether
the subscription is accepted or subscription funds returned. The Escrow Agent
will invest the subscription funds in short-term United States Treasury bills or
comparable authorized instruments while held in escrow.
A limited partner of a Series may request any or all of his investment in such
Series be redeemed by such Series at the net asset value of a Unit within such
Series as of the end of the month, subject to a minimum redemption of $1,000 and
subject further to such limited partner having an investment in such Series,
after giving effect to the requested redemption, at least equal to the minimum
initial investment amount of $5,000. Limited partners must transmit a written
request of such withdrawal to Quadriga Capital Management, Inc. not less than
ten business days prior to the end of the month (or such shorter period as
permitted by Quadriga Capital Management, Inc.) as of which redemption is to be
effective. Redemptions will generally be paid within 20 days after the date of
redemption. However, in special circumstances, including, but not limited to,
inability to liquidate dealers' positions as of a redemption date or default or
delay in payments due to each Series from clearing brokers, banks or other
persons or entities, each Series may in turn delay payment to persons requesting
redemption of the proportionate part of the net assets of each Series
represented by the sums that are subject of such default or delay.
9. SUBSEQUENT EVENTS
For January 2003 and February 2003, the Fund received capital contributions of
approximately $2,203,000 in Series A and $2,796,000 in Series B.
A-16
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
1.01* Form of Selling Agreement among each Series, Quadriga Capital
Management and the Selling Agent.
1.02* Form of Additional Selling Agent among each Series, Quadriga Capital
Management and the Additional Selling Agent.
a. Quadriga Superfund, L.P. Limited Partnership Agreement.
b. Certificate of Limited Partnership.
10.01* Form of Customer Agreement between each Series and the Clearing
Brokers.
10.02* Subscription Agreement and Power of Attorney.
10.03* Form of Escrow Agreement between each Series and HSBC Bank USA.
99 Certifications of Chief Officers
- ---------------------
* Incorporated by reference to the respective exhibit to the Registrant's
Registration Statement on Form S-1 (No. 333-88460) filed on October 22,
2002, as amended on October 31, 2002.
Upon request, the Registrant will furnish a copy of any Exhibit to this report
upon payment of reasonable copying and mailing expenses.