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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File number: 333-88460
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QUADRIGA SUPERFUND, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 98-0375395
- --------------------------- ------------------------------------
(State of Organization) (IRS Employer Identification Number)
Le Marquis Complex, Unit 5
P.O. Box 1479
Grand Anse
St. George's, Grenada
West Indies N/A
- -------------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
(473) 439-2418
- --------------
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
Total number of Pages: 27 plus exhibits
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements of Quadriga Superfund, L.P. - Series A are
included in Item 1:
Page
----
FINANCIAL STATEMENTS
Statement of Assets and Liabilities as of June 30, 2004 (unaudited)
and December 31, 2003 (audited) 3
Condensed Schedule of Investments as of June 30, 2004 (unaudited) 4
Condensed Schedule of Investments as of December 31, 2003 (audited) 5
Statements of Operations for the three months ended June 30, 2004 and
June 30, 2003 (unaudited) and for the six months ended June 30, 2004 and
June 30, 2003 (unaudited) 6
Statement of Changes in Net Assets for the six months ended June 30, 2004
and June 30, 2003 (unaudited) 7
Statement of Cash Flows for the six months ended June 30, 2004 and
June 30, 2003 (unaudited) 8
The following financial statements of Quadriga Superfund, L.P. - Series B are
included in Item 1:
Page
----
FINANCIAL STATEMENTS
Statement of Assets and Liabilities as of June 30, 2004 (unaudited)
and December 31, 2003 (audited) 9
Condensed Schedule of Investments as of June 30, 2004 (unaudited) 10
Condensed Schedule of Investments as of December 31, 2003 (audited) 11
Statements of Operations for the three months ended June 30, 2004 and June 30,
2003 (unaudited) and for the six months ended June 30, 2004 and June 30,
2003 (unaudited) 12
Statement of Changes in Net Assets for the six months ended June 30, 2004 and
June 30, 2003 (unaudited) 13
Statement of Cash Flows for the six months ended June 30, 2004 and June 30, 2003
(unaudited) 14
NOTES TO SERIES A AND SERIES B UNAUDITED FINANCIAL STATEMENTS DATED JUNE 30, 2004 15-18
2
QUADRIGA SUPERFUND, L.P. - SERIES A
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003 (AUDITED)
JUNE 30, 2004 DECEMBER 31, 2003
------------- -----------------
ASSETS
US GOVERNMENT SECURITIES, at market
cost $21,266,693 and $13,739,594 as of
June 30, 2004 and December 31, 2003 $21,294,129 $13,749,608
DUE FROM BROKERS 1,340,159 989,646
UNREALIZED APPRECIATION ON OPEN FORWARD CONTRACTS 393,857 1,196,849
FUTURES CONTRACTS PURCHASED 275,484 583,646
FUTURES CONTRACTS SOLD 52,279 -
CASH 1,907,848 1,597,546
----------- -----------
Total assets 25,263,756 18,117,295
----------- -----------
LIABILITIES
UNREALIZED DEPRECIATION ON OPEN FORWARD CONTRACTS 837,104 231,306
FUTURES CONTRACTS SOLD - 8,595
ADVANCE SUBSCRIPTIONS 1,539,746 1,097,282
DUE TO BROKERS - 532,552
REDEMPTION PAYABLE - 8,040
FEES PAYABLE 133,507 94,731
----------- -----------
Total liabilities 2,510,357 1,972,506
----------- -----------
NET ASSETS $22,753,399 $16,144,789
=========== ===========
NUMBER OF SHARES 18,804.154 12,256.648
----------- -----------
NET ASSETS VALUE PER SHARE $ 1,210.02 $ 1,317.23
=========== ===========
See accompanying notes to financial statements
3
QUADRIGA SUPERFUND, L.P. - SERIES A
CONDENSED SCHEDULE OF INVESTMENTS
JUNE 30, 2004 (UNAUDITED)
PERCENTAGE OF MARKET OR
FACE VALUE NET ASSETS FAIR VALUE
DEBT SECURITIES UNITED STATES, AT MARKET
United States Treasury Bills due November 26, 2004
(cost $21,266,693), securities are held in margin
accounts as collateral for open futures and forwards $ 21,415,000 93.6 % $ 21,294,129
----- ------------
FORWARD CONTRACTS, AT FAIR VALUE
UNREALIZED APPRECIATION ON FORWARD CONTRACTS
CURRENCIES 0.6 % $ 129,587
METALS 1.2 264,270
----- ------------
Total unrealized appreciation on forward contracts 1.8 393,857
----- ------------
UNREALIZED DEPRECIATION ON FORWARD CONTRACTS
CURRENCIES (0.6) (127,365)
METALS (3.1) (709,739)
----- ------------
Total unrealized depreciation on forward contracts (3.7) (837,104)
----- ------------
TOTAL FORWARD CONTRACTS, AT FAIR VALUE (1.9) % $ (443,247)
----- ------------
FUTURES CONTRACTS, AT FAIR VALUE
FUTURES CONTRACTS PURCHASED
CURRENCY (0.1) % $ (14,059)
ENERGY (0.9) (199,665)
FOOD & FIBER 0.0 * 1,343
GRAINS 0.0 * (9,310)
INDICES 1.5 347,425
LIVESTOCK 0.7 149,750
----- ------------
Total futures contracts purchased 1.2 275,484
----- ------------
FUTURES CONTRACTS SOLD
FINANCIAL 0.1 19,729
FOOD & FIBER 0.0 * 3,401
GRAINS 0.0 * 7,362
INDICES 0.1 18,900
WOOD & RUBBER 0.0 * 2,887
----- ------------
Total futures contracts sold 0.2 52,279
----- ------------
TOTAL FUTURES CONTRACTS, AT FAIR VALUE 1.4 % $ 327,763
----- ------------
FUTURES AND FORWARD CONTRACTS BY COUNTRY COMPOSITION
JAPAN 0.5 % $ 109,010
UNITED KINGDOM (2.0) (449,518)
UNITED STATES 0.5 115,353
OTHER 0.5 109,671
----- ------------
TOTAL FUTURES AND FORWARD CONTRACTS BY COUNTRY (0.5) % $ (115,484)
----- ------------
* Due to rounding
See accompanying notes to financial statements
4
QUADRIGA SUPERFUND, L.P. - SERIES A
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 (AUDITED)
PERCENTAGE OF MARKET OR
FACE VALUE NET ASSETS FAIR VALUE
DEBT SECURITIES UNITED STATES, AT MARKET United States Treasury Bills due May
27, 2004
(cost $13,739,594), securities are held in margin
accounts as collateral for open futures and forwards $ 13,805,000 85.2 % $ 13,749,608
---- -------------
FORWARD CONTRACTS, AT FAIR VALUE
UNREALIZED APPRECIATION ON FORWARD CONTRACTS
CURRENCIES 0.9 % $ 140,479
METALS 6.5 1,056,370
---- -------------
Total unrealized appreciation on forward contracts 7.4 1,196,849
---- -------------
UNREALIZED DEPRECIATION ON FORWARD CONTRACTS
CURRENCIES (0.4) (65,291)
METALS (1.0) (166,015)
---- -------------
Total unrealized depreciation on forward contracts (1.4) (231,306)
---- -------------
TOTAL FORWARD CONTRACTS, AT FAIR VALUE 6.0 % $ 965,543
---- -------------
FUTURES CONTRACTS, AT FAIR VALUE
FUTURES CONTRACTS PURCHASED
ENERGY 1.7 % $ 279,675
GRAINS 0.1 17,861
INDICES 0.2 27,189
METALS 1.6 258,921
---- -------------
Total futures contracts purchased 3.6 583,646
---- -------------
FUTURES CONTRACTS SOLD
GRAINS (0.1) (9,521)
INDICES 0.0 * 926
---- -------------
Total futures contracts sold (0.1) (8,595)
---- -------------
TOTAL FUTURES CONTRACTS, AT FAIR VALUE 3.5 % $ 575,051
---- -------------
FUTURES AND FORWARD CONTRACTS BY COUNTRY COMPOSITION
JAPAN 0.4 % $ 68,877
UNITED KINGDOM 6.0 977,375
UNITED STATES 3.1 494,342
---- -------------
TOTAL FUTURES AND FORWARD CONTRACTS BY COUNTRY 9.5 % $ 1,540,594
---- -------------
* Due to rounding
See accompanying notes to financial statements
5
QUADRIGA SUPERFUND, L.P. - SERIES A
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
INVESTMENT INCOME, interest $ 60,734 $ 14,402 $ 102,752 $ 22,132
----------- ----------- ----------- -----------
EXPENSES
Management fee 105,209 35,015 198,087 52,033
Organization and offering expenses 56,869 18,928 107,073 28,127
Operating expenses 8,530 2,839 16,060 4,219
Selling commission 227,477 75,705 428,293 112,502
Incentive fee - (701) 651,950 226,783
Brokerage commissions 196,622 89,853 390,491 126,705
Other 7,256 1,090 17,383 1,892
----------- ----------- ----------- -----------
Total expenses 601,963 222,729 1,809,337 552,261
----------- ----------- ----------- -----------
NET INVESTMENT LOSS (541,229) (208,327) (1,706,585) (530,129)
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on futures
and forward contracts (1,725,574) 703,576 796,877
632,199
Net change in unrealized appreciation
(depreciation) on futures and forward
contracts (2,567,892) (217,775) (1,656,078) (193,190)
----------- ----------- ----------- -----------
NET GAIN (LOSS) ON INVESTMENTS (4,293,466) 485,801 (859,201) 439,009
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS FROM OPERATIONS ($4,834,695) $ 277,474 ($2,565,786) ($ 91,120)
----------- ----------- ----------- -----------
See accompanying notes to financial statements
6
QUADRIGA SUPERFUND, L.P. - SERIES A
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
2004 2003
-------------- -------------
DECREASE IN NET ASSETS FROM OPERATIONS
Net investment loss $ (1,706,585) $ (530,129)
Net realized gain on futures and forward contracts 796,877 632,199
Net change in unrealized appreciation or depreciation
on futures and forward contracts (1,656,078) (193,190)
------------ ------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (2,565,786) (91,120)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Issuance of shares 10,602,235 7,714,240
Redemption of shares (1,427,839) (45,337)
------------ ------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS 9,174,396 7,668,903
------------ ------------
NET INCREASE IN NET ASSETS 6,608,610 7,577,783
NET ASSETS, beginning of period 16,144,789 1,216,435
------------ ------------
NET ASSETS, end of period $ 22,753,399 $ 8,794,218
------------ ------------
SHARES, beginning of period 12,256.648 1,110.275
ISSUANCE OF SHARES 8,741.799 6,527.755
REDEMPTION OF SHARES (2,194.293) (35.268)
------------ ------------
SHARES, end of period 18,804.154 7,602.762
------------ ------------
See accompanying notes to financial statements
7
QUADRIGA SUPERFUND, L.P. - SERIES A
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
2004 2003
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net decrease in net assets from operations $ (2,565,786) $ (91,120)
Adjustments to reconcile net decrease in net assets from operations to net
cash used in operating activities:
Changes in operating assets and liabilities:
US Government securities (7,544,521) (5,217,701)
Due from brokers (883,065) (2,570,485)
Unrealized appreciation on open forward contracts 802,992 (77,049)
Futures contracts purchased 308,162 (88,440)
Unrealized depreciation on open forward contracts 605,798 334,324
Futures contracts sold (60,874) 24,355
Fees payable 38,776 27,840
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (9,298,518) (7,658,276)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Subscriptions, net of change in advance subscriptions 11,044,699 8,457,974
Redemptions, net of redemption payable (1,435,879) (45,337)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,608,820 8,412,637
------------ ------------
NET INCREASE IN CASH 310,302 754,361
CASH, beginning of period 1,597,546 402,631
------------ ------------
CASH, end of period $ 1,907,848 $ 1,156,992
------------ ------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
2003 subscriptions received in 2002 $ 972,745
------------
2004 subscriptions received in 2003 $ 1,097,282
------------
Redemption payable $ 8,040
============
See accompanying notes to financial statements
8
QUADRIGA SUPERFUND, L.P. - SERIES B
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003
(AUDITED)
JUNE 30, 2004 DECEMBER 31, 2003
-------------- ------------------
ASSETS
US GOVERNMENT SECURITIES, at market
cost $ 25,437,437 and $17,392,760 as of
June 30, 2004 and December 31, 2003 $25,470,761 $17,405,163
DUE FROM BROKERS 4,200,545 3,187,377
UNREALIZED APPRECIATION ON OPEN FORWARD CONTRACTS 776,657 2,176,599
FUTURES CONTRACTS PURCHASED 545,838 1,030,282
FUTURES CONTRACTS SOLD 97,805 -
CASH 2,140,250 854,910
----------- -----------
Total assets 33,231,856 24,654,331
----------- -----------
LIABILITIES
UNREALIZED DEPRECIATION ON OPEN FORWARD CONTRACTS 1,589,028 436,869
FUTURES CONTRACTS SOLD - 15,398
ADVANCE SUBSCRIPTIONS 1,915,097 920,395
DUE TO BROKER - 1,006,857
REDEMPTION PAYABLE - 8,152
FEES PAYABLE 173,411 129,889
----------- -----------
Total liabilities 3,677,536 2,517,560
----------- -----------
NET ASSETS $29,554,320 $22,136,771
=========== ===========
NUMBER OF SHARES 22,392.930 14,945.226
NET ASSETS VALUE PER SHARE $ 1,319.81 $ 1,481.19
----------- -----------
See accompanying notes to financial statements.
9
QUADRIGA SUPERFUND, L.P. - SERIES B
CONDENSED SCHEDULE OF INVESTMENTS
JUNE 30, 2004 (UNAUDITED)
PERCENTAGE OF MARKET OR
FACE VALUE NET ASSETS FAIR VALUE
DEBT SECURITIES UNITED STATES, AT MARKET
United States Treasury Bills due November 26, 2004
(cost $25,437,437), securities are held in margin
accounts as collateral for open futures and forwards $ 25,615,000 86.2 % $ 25,470,761
---- ------------
FORWARD CONTRACTS, AT FAIR VALUE
UNREALIZED APPRECIATION ON FORWARD CONTRACTS
CURRENCIES 0.9 % $ 265,260
METALS 1.7 511,397
---- ------------
Total unrealized appreciation on
forward contracts 2.6 776,657
---- ------------
UNREALIZED DEPRECIATION ON FORWARD CONTRACTS
CURRENCIES (0.8) (242,764)
METALS (4.5)* (1,346,264)
---- ------------
Total unrealized depreciation on
forward contracts (5.3) (1,589,028)
---- ------------
TOTAL FORWARD CONTRACTS, AT FAIR VALUE (2.7)% $ (812,371)
---- ------------
FUTURES CONTRACTS, AT FAIR VALUE
FUTURES CONTRACTS PURCHASED
CURRENCY (0.1)% $ (26,107)
ENERGY (1.3) (371,860)
FOOD & FIBER 0.0 * 3,172
GRAINS (0.1) (17,291)
INDICES 2.3 675,944
LIVESTOCK 1.0 281,980
---- ------------
Total futures contracts purchased 1.8 545,838
---- ------------
FUTURES CONTRACTS SOLD
FINANCIAL 0.1 34,052
FOOD & FIBER 0.1 6,602
GRAINS 0.0 * 14,764
INDICES 0.1 36,750
WOOD & RUBBER 0.0 * 5,637
---- ------------
Total futures contracts sold 0.3 97,805
---- ------------
TOTAL FUTURES CONTRACTS, AT FAIR VALUE 2.1 % $ 643,643
---- ------------
FUTURES AND FORWARD CONTRACTS BY COUNTRY COMPOSITION
JAPAN 0.7 % $ 212,129
UNITED KINGDOM (3.1) (903,233)
UNITED STATES 1.1 313,496
OTHER 0.7 208,880
---- ------------
TOTAL FUTURES AND FORWARD CONTRACTS BY COUNTRY (0.6)% $ (168,728)
---- ------------
* Due to rounding
See accompanying notes to financial statements.
10
QUADRIGA SUPERFUND, L.P. - SERIES B
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 (AUDITED)
PERCENTAGE OF MARKET OR
FACE VALUE NET ASSETS FAIR VALUE
DEBT SECURITIES UNITED STATES, AT MARKET
United States Treasury Bills due May 27, 2004 (cost $17,392,760),
securities are held in margin
accounts as collateral for open futures and forwards $ 17,475,000 78.6 % $ 17,405,163
---- ------------
FORWARD CONTRACTS, AT FAIR VALUE
UNREALIZED APPRECIATION ON FORWARD CONTRACTS
CURRENCIES 1.2 % $ 267,624
METALS 8.6 1,908,975
---- ------------
Total unrealized appreciation on
forward contracts 9.8 2,176,599
---- ------------
UNREALIZED DEPRECIATION ON FORWARD CONTRACTS
CURRENCIES (0.6) (127,939)
METALS (1.4) (308,930)
---- ------------
Total unrealized depreciation on
forward contracts (2.0) (436,869)
---- ------------
TOTAL FORWARD CONTRACTS, AT FAIR VALUE 7.8 % $ 1,739,730
---- ------------
FUTURES CONTRACTS, AT FAIR VALUE
FUTURES CONTRACTS PURCHASED
ENERGY 2.2 % $ 485,012
GRAINS 0.2 34,904
INDICES 0.2 48,460
METALS 2.1 461,906
---- ------------
Total futures contracts purchased 4.7 1,030,282
---- ------------
FUTURES CONTRACTS SOLD
GRAINS (0.1) (17,045)
INDICES 0.0 * 1,647
---- ------------
Total futures contracts sold (0.1) (15,398)
---- ------------
TOTAL FUTURES CONTRACTS, AT FAIR VALUE 4.6 % $ 1,014,884
---- ------------
FUTURES AND FORWARD CONTRACTS BY COUNTRY COMPOSITION
JAPAN 0.5 % $ 108,030
UNITED KINGDOM 7.9 1,755,449
UNITED STATES 4.0 891,135
---- ------------
TOTAL FUTURES AND FORWARD CONTRACTS BY COUNTRY 12.4 % $ 2,754,614
---- ------------
* Due to rounding
See accompanying notes to financial statements.
11
QUADRIGA SUPERFUND, L.P. - SERIES B
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
INVESTMENT INCOME, interest $ 76,892 $ 21,452 $ 135,017 $ 32,479
----------- ----------- ----------- -----------
EXPENSES
Management fee 140,453 54,984 273,261 81,260
Organization and offering expenses 75,921 29,722 147,709 43,925
Operating expenses 11,388 4,458 22,156 6,588
Selling commission 303,683 118,886 590,836 175,699
Incentive fee - (8,126) 1,158,857 486,682
Brokerage commissions 377,258 140,616 760,585 224,922
Other 15,993 1,064 35,029 3,024
----------- ----------- ----------- -----------
Total expenses 924,696 341,604 2,988,433 1,022,100
----------- ----------- ----------- -----------
NET INVESTMENT LOSS (847,804) (320,152) (2,853,416) (989,621)
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on futures
and forward contracts (3,359,484) 1,520,120 1,248,637 1,040,600
----------- ----------- ----------- -----------
Net change in unrealized appreciation or
depreciation on futures and forward contracts (4,996,789) (508,811) (2,923,342) (471,386)
----------- ----------- ----------- -----------
NET GAIN (LOSS) ON INVESTMENTS (8,356,273) 1,011,309 (1,674,705) 569,214
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ($9,204,077) $ 691,157 ($4,528,121) ($ 420,407)
----------- ----------- ----------- -----------
See accompanying notes to financial statements.
12
QUADRIGA SUPERFUND, L.P. - SERIES B
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
2004 2003
------------ ------------
DECREASE IN NET ASSETS FROM OPERATIONS
Net investment loss $ (2,853,416) $ (989,621)
Net realized gain (loss) on futures and forward contracts 1,248,637 1,040,600
Net change in unrealized appreciation or depreciation
on futures and forward contracts (2,923,342) (471,386)
------------ ------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (4,528,121) (420,407)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Issuance of shares 13,505,906 11,690,937
Redemption of shares (1,560,236) (197,218)
------------ ------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS 11,945,670 11,493,719
------------ ------------
NET INCREASE IN NET ASSETS 7,417,549 11,073,312
NET ASSETS, beginning of period 22,136,771 2,196,981
------------ ------------
NET ASSETS, end of period $ 29,554,320 $ 13,270,293
------------ ------------
SHARES, beginning of period 14,945.226 1,894.331
ISSUANCE OF SHARES 8,729.011 9,052.779
REDEMPTION OF SHARES (1,281.307) (164.488)
------------ ------------
SHARES, end of period 22,392.930 10,782.622
------------ ------------
See accompanying notes to financial statements.
13
QUADRIGA SUPERFUND, L.P. - SERIES B
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
2004 2003
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase (decrease) in net assets from operations $ (4,528,121) $ (420,407)
Adjustments to reconcile net decrease in net assets from operations
to net cash provided used in operating activities:
Changes in operating assets and liabilities:
US Government securities (8,065,598) (7,388,556)
Due from brokers (1,013,168) (4,273,291)
Unrealized appreciation on open forward contracts 1,399,942 (166,964)
Futures contracts purchased 484,444 (149,928)
Unrealized depreciation on open forward contracts 1,152,159 725,336
Futures contracts sold (113,203) 62,942
Due to broker (1,006,857) -
Fees payable 43,522 (54,972)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (11,646,880) (11,665,840)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Subscriptions, net of change in advance subscriptions 14,500,608 12,903,030
Redemptions, net of redemption payable (1,568,388) (197,218)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,932,220 12,705,812
------------ ------------
NET INCREASE IN CASH 1,285,340 1,039,972
CASH, beginning of period 854,910 396,680
------------ ------------
CASH, end of period $ 2,140,250 1,436,652
------------ ------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
2003 subscriptions received in 2002 $ 961,768
------------ ------------
2004 subscriptions received in 2003 $ 920,395
------------
Redemption payable $ 8,152
============
See accompanying notes to financial statements.
14
QUADRIGA SUPERFUND, L.P. - SERIES A AND B
NOTES TO FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
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 two Series will be traded and managed the same way except for
the degree of leverage.
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 either series to less than $500,000.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited financial statements have been prepared in accordance with the
accounting principals generally accepted in the United States of America and the
rules and regulations of the Securities and Exchange Commission with respect to
the Form 10-Q and reflect all adjustments which in the opinion of management are
normal and recurring, which are necessary for a fair statement of the results of
interim periods presented. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the related
notes included in the Fund's Annual Report on Form 10-K for the year ended
December 31, 2003.
Valuation of Investments and 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 period, which represents market value for those commodity interests for
which market quotes are readily available.
The Fund uses the amortized cost method for valuing the US Treasury Bills;
accordingly, the cost of securities plus accreted discount, or minus amortized
premium approximates fair value.
Translation of Foreign Currency
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollar amounts at the period 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.
Investment Transactions and Related Investment Income
Investment transactions are accounted for on a trade-date basis. Interest is
recognized on the accrual basis.
15
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 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.
Reclassifications
Certain prior period amounts have been reclassified to conform to current year
presentation.
3. DUE FROM/TO BROKERS
Amounts due from brokers may be restricted to the extent that they serve as
deposits for securities sold short. Amounts due to brokers represent margin
borrowings that are collateralized by certain securities.
In the normal course of business, all of the Fund's marketable securities
transactions, money balances and marketable 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.
Advance subscriptions represent cash received prior to the end of the period for
subscriptions of the subsequent month and do not participate in the earnings of
the Fund until the beginning of the subsequent month.
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). 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.
At June 30, 2004 the General Partner's interest is 4.5% of Series A's and 3.5%
of Series B's total net assets.
6. FINANCIAL HIGHLIGHTS
Financial highlights for the period January 1, 2004 through June 30, 2004 are as
follows:
16
SERIES A SERIES B
---------- ----------
Total return
Total return before incentive fees (5.5)% (7.4)%
Incentive fees (2.6) (3.5)
---------- ----------
Total return after incentive fees (8.1)% (10.9)%
========== ==========
Ratio to average partners' capital
Operating expenses before incentive fees 10.6 % 12.2 %
Incentive fees 3.0 3.9
---------- ----------
Total expenses 13.6 % 16.1 %
========== ==========
Net investment income (loss) before incentive fee (9.7)% (11.3)%
========== ==========
Net asset value per unit, beginning of period $ 1,317.23 $ 1,481.19
Net increase in net assets from operations (107.21) (161.38)
---------- ----------
Net asset value per unit, end of period $ 1,210.02 $ 1,319.81
========== ==========
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. The ratios excluding the incentive fee have been annualized.
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. 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 a future obligation or loss. 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 risk 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. 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 interest positions at the same time, and
the General Partner was unable to offset such positions, the Fund could
experience substantial losses.
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., Bear Stearns & Co.
Inc., Barclays Capital 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,
17
on-line monitoring systems provide account analysis of futures and forward
positions by sector, margin requirements, gain and loss transactions, and
collateral positions.
The majority of these instruments mature within one year of June 30, 2004.
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.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Quadriga Superfund, L.P. commenced the offering of its Units of Limited
Partnership Interest 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. For the period ended June 30, 2004, subscriptions
totaling $58,060,173 have been accepted and redemptions over the same period
totaled $4,785,958.
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 borrowings. 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. This may affect the fund's
ability to initiate new positions or close existing ones or may prevent it from
having orders executed. 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.
Trading in forward contracts introduces a possible further impact on
liquidity. Because such contracts are executed "off exchange" between private
parties, the time required to offset or "unwind" these positions may be greater
than that for regulated instruments. This potential delay could be exacerbated
to the extent a counterparty is not a United States person.
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.
RESULTS OF OPERATIONS
Series A:
Net results for the quarter ended June 30, 2004 were a loss of 18.71%
in net asset value compared to the preceding quarter. This decrease consisted of
interest income of 0.23%, trading performance (including commissions) of -17.40%
and charges of 1.54% due to management fees, organization expenses, operating
expenses, selling commissions and incentive fees. At June 30, 2004 and March 31,
2004, the net asset value per unit of Series A was $1,210.02 and $1,488.43,
respectively.
Series B:
Net results for the quarter ended June 30, 2004 were a loss of 25.49%
in net asset value compared to the preceding quarter. This decrease consisted of
interest income of 0.21%, trading performance (including commissions) of -24.23%
and charges of 1.47% due to management fees, organization expenses, operating
expenses, selling commissions and incentive fees. Series B generally magnifies
the performance for Series A during any period, either positive or negative, due
to Series B's leverage of approximately 1.5 times Series A. At June 30, 2004 and
March 31, 2004, the net asset value per unit of Series B was $1,319.81 and
$1,771.36, respectively.
19
Fund results for April 2004:
In April, long positions in stock market indices and metals were
unprofitable due to falling prices in both market sectors.
Long positions in the energy sector were the only notably positive
contributors to the fund's performance for this month.
The largest losses resulted from a combined long/short strategy in
foreign currencies.
During the month of April 2004, Series A lost 14.20% and Series B lost
19.59%, including charges.
Fund results for May 2004:
Although the downwards trend on the stock markets reversed, long
positions still produced losses for the month.
Long positions in the energy markets performed well and were the main
source of this month's positive performance.
In the financial futures sector, short positions in Bonds, Notes and
Interest Rates generated slight profits.
Only combined long/short positions in foreign currencies produced
significant losses.
For May, Series A increased by 7.21% and Series B by 9.11%, each
including charges.
Fund results for June 2004:
In the month of June, long positions in stock indices faced a weakening
of the upwards trend, but were still able to perform slightly positive.
Short positions in the other financial futures sectors lost along with
long positions in the metal markets.
The most significant losses were incurred by long positions in the
energy sector due to a sharp price-decline in these markets.
The net asset value of Series A and B lost 11.62% and 15.07%,
respectively, including charges.
For the second quarter of 2004, the most profitable market group overall was the
energy sector while positions in the currencies markets contributed the greatest
amount of losses.
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 a 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
20
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.
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.
ITEM 3. 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, "Quantitative and Qualitative
Disclosures About Market Risk," is based on an assessment of reasonably possible
market movements and the 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
21
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.
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 June 30, 2004. All open
position trading risk exposures of the Fund have been included in calculating
the figures set forth below. As of June 30, 2004 and March 31, 2004, the net
asset values for Series A were $22,753,399 and $21,339,722, respectively, and
the net asset values for Series B as of such dates were $29,554,320 and
$30,921,529, respectively.
Series A as of June 30, 2004:
SECTOR MARKET RISK (USD) % OF TOTAL CAPITALIZATION (NET ASSETS)
Stock Indices 1,835,212 8.07
Financial Futures 791,724 3.48
Currencies 662,248 2.91
Agricultural Products 290,818 1.28
Energy 2,323,790 10.21
Metals 584,465 2.57
Series B as of June 30, 2004:
SECTOR MARKET RISK (USD) % OF TOTAL CAPITALIZATION (NET ASSETS)
Stock Indices 3,539,806 11.98
Financial Futures 1,422,969 4.81
Currencies 1,271,469 4.30
Agricultural Products 552,720 1.87
Energy 4,443,708 15.04
Metals 1,118,680 3.79
22
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 -- gives 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 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
June 30, 2004 by market sector.
Currencies
The Fund's currency exposure is to exchange rate fluctuations,
primarily those 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 June 30,
2004 the exposure to these markets was relatively low in comparison to historic
levels.
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 June 30, 2004 the
exposure to these markets was similar to historic levels.
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
23
changes but would make it difficult for the Fund to avoid being "whipsawed" into
numerous smaller losses. As of June 30, 2004 the exposure to these markets was
relatively high in comparison to historic levels.
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. The exposure to these markets as of June 30, 2004
was the highest among all market groups.
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 June 30, 2004
was relatively low in comparison to historic levels.
Agricultural Market
The Fund's agricultural market exposure is 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. The exposure to these markets as of June 30, 2004 was
relatively low in comparison to historic levels.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
General
On July 22, 2003, Quadriga Capital Management on behalf of the Fund
filed an amended registration statement with the U.S. Securities and Exchange
Commission which became effective on July 25, 2003. The amended registration
statement included as a risk possible contingent liability resulting from
potential claims for rescission from investors and regulatory or enforcement
action for any sales of Units made without an effective registration statement.
On January 10, 2003, Quadriga Capital Management on behalf of the Fund
filed a post-effective amendment to the registration statement which amended the
plan of distribution. Before such amendment had been declared effective, and as
of June 30, 2003, the Fund had sold a total of 5,604 units of Series A in the
principal amount of $6.74 million and 8,091 units of Series B in the principal
amount of $10.73 million. As a regulated company, Quadriga Capital Management
faces potential liability in the normal cause of its business from any
administrative action or in any situation in which it is found to have engaged
in activities which violate applicable law. Quadriga Capital Management is
unable to estimate the probability of assertion of any related claims or
assessments.
Except as described in the preceding two paragraphs, 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.
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).
24
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.
ITEM 4. 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 quarterly 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 90 days prior to the filing date of this 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 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.
25
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submissions of Matters to a vote of Security Holders.
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
None
26
SIGNATURES
Pursuant to the requirements 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 August 13, 2004.
QUADRIGA SUPERFUND, L.P.
(Registrant)
By: Quadriga Capital Management, Inc.
General Partner
By: /s/Christian Baha
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Christian Baha
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit Number Description of Document
- -------------- -----------------------
31.1 Certification by Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification by Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.1 Certification by Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.2 Certification by Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
E-1