Attached files
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EXCEL - IDEA: XBRL DOCUMENT - Millburn Multi-Markets Fund L.P. | Financial_Report.xls |
EX-32.1 - EXHIBIT 32.1 - Millburn Multi-Markets Fund L.P. | v342931_ex32-1.htm |
EX-31.2 - EXHIBIT 31.2 - Millburn Multi-Markets Fund L.P. | v342931_ex31-2.htm |
EX-32.3 - EXHIBIT 32.3 - Millburn Multi-Markets Fund L.P. | v342931_ex32-3.htm |
EX-31.3 - EXHIBIT 31.3 - Millburn Multi-Markets Fund L.P. | v342931_ex31-3.htm |
EX-31.1 - EXHIBIT 31.1 - Millburn Multi-Markets Fund L.P. | v342931_ex31-1.htm |
EX-32.2 - EXHIBIT 32.2 - Millburn Multi-Markets Fund L.P. | v342931_ex32-2.htm |
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: March 31, 2013
Or
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 000-54028
MILLBURN MULTI-MARKETS FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware | 26-4038497 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
c/o MILLBURN RIDGEFIELD CORPORATION
411 West Putnam Avenue
Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 625-7554
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
PART I. FINANANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Millburn Multi-Markets Fund L.P. | ||
Financial statements | ||
For the three months ended March 31, 2013 and 2012 (unaudited) | ||
Statements of Financial Condition (a) | 3 | |
Statements of Operations (b) | 4 | |
Statements of Changes in Partners' Capital (b) | 5 | |
Statements of Financial Highlights (b) | 6 | |
Notes to Financial Statements | 8 |
(a) At March 31, 2013 and December 31, 2012 (unaudited)
(b) For the three months ended March 31, 2013 and 2012 (unaudited)
2 |
Millburn Multi-Markets Fund L.P.
Statements of Financial Condition (UNAUDITED)
March 31, | December 31, | |||||||
2013 | 2012 | |||||||
ASSETS | ||||||||
Investment in Millburn Multi-Markets Trading L.P. (the "Master Fund") | $ | 199,887,747 | $ | 228,943,314 | ||||
Due from the Master Fund | 2,446,759 | 5,596,779 | ||||||
Cash | 196,842 | 1,516,001 | ||||||
TOTAL | $ | 202,531,348 | $ | 236,056,094 | ||||
LIABILITIES AND PARTNERS' CAPITAL | ||||||||
LIABILITIES: | ||||||||
Capital contributions received in advance | $ | 195,321 | $ | 1,513,559 | ||||
Capital withdrawal payable | 2,446,759 | 5,596,779 | ||||||
Due to the Master Fund | 1,521 | 2,442 | ||||||
Total liabilities | 2,643,601 | 7,112,780 | ||||||
PARTNERS' CAPITAL: | ||||||||
General Partner | 3,311,578 | 3,228,323 | ||||||
Limited Partners: | ||||||||
Series A (182,012.2178 and 181,345.3268 units outstanding) | 172,142,712 | 168,880,502 | ||||||
Series B (18,274.2023 and 20,671.4907 units outstanding) | 18,304,695 | 20,299,372 | ||||||
Series C (6,062.1842 and 36,885.1442 units outstanding) | 6,128,762 | 36,535,117 | ||||||
Total limited partners | 196,576,169 | 225,714,991 | ||||||
Total partners' capital | 199,887,747 | 228,943,314 | ||||||
TOTAL | $ | 202,531,348 | $ | 236,056,094 | ||||
NET ASSET VALUE PER UNIT OUTSTANDING | ||||||||
Series A | $ | 945.78 | $ | 931.26 | ||||
Series B | $ | 1,001.67 | $ | 982.00 | ||||
Series C | $ | 1,010.98 | $ | 990.51 |
See notes to financial statements
3 |
Millburn Multi-Markets Fund L.P.
Statements of Operations (UNAUDITED)
For the three months ended | ||||||||
March 31, | March 31, | |||||||
2013 | 2012 | |||||||
NET INVESTMENT LOSS ALLOCATED FROM THE MASTER FUND | ||||||||
INCOME — Interest income | $ | 90,933 | $ | 79,312 | ||||
Expenses: | ||||||||
Management fees | 1,048,028 | 1,153,034 | ||||||
Brokerage commissions | 263,049 | 159,315 | ||||||
Selling commissions and platform fees | 874,965 | 839,484 | ||||||
Administrative and operating expenses | 275,833 | 302,103 | ||||||
Custody fee and other expenses | 10,440 | 12,552 | ||||||
Total expenses | 2,472,315 | 2,466,488 | ||||||
Net investment loss allocated from the Master Fund | (2,381,382 | ) | (2,387,176 | ) | ||||
NET REALIZED AND UNREALIZED GAINS (LOSSES) ALLOCATED FROM THE MASTER FUND | ||||||||
Net realized gains (losses) on closed positions: | ||||||||
Futures and forward currency contracts | 7,799,115 | (9,514,077 | ) | |||||
Foreign exchange translation | (32,440 | ) | (35,754 | ) | ||||
Net change in unrealized: | ||||||||
Futures and forward currency contracts | (1,420,738 | ) | (7,095,650 | ) | ||||
Foreign exchange translation | (48,046 | ) | (1,773 | ) | ||||
Net gains (losses) from U.S. Treasury notes: | ||||||||
Realized | 4,922 | (3,206 | ) | |||||
Net change in unrealized | 10,204 | (57,408 | ) | |||||
Total net realized and unrealized gains (losses) allocated from the Master Fund | 6,313,017 | (16,707,868 | ) | |||||
NET INCOME (LOSS) | $ | 3,931,635 | $ | (19,095,044 | ) |
See notes to financial statements
4 |
Millburn Multi-Markets Fund L.P.
Statements of Changes in Partners' Capital (UNAUDITED)
For the three months ended March 31, 2013 and 2012
General | Limited Partners | |||||||||||||||||||||||||||||||
Partner | Series A | Series B | Series C | Total | ||||||||||||||||||||||||||||
Amount | Amount | Units | Amount | Units | Amount | Units | Amount | |||||||||||||||||||||||||
PARTNERS' CAPITAL — December 31, 2012 | $ | 3,228,323 | $ | 168,880,502 | 181,345.3268 | $ | 20,299,372 | 20,671.4907 | $ | 36,535,117 | 36,885.1442 | $ | 228,943,314 | |||||||||||||||||||
Capital contributions | - | 7,828,959 | 8,349.2316 | 478,000 | 482.0706 | 172,061 | 172.9588 | 8,479,020 | ||||||||||||||||||||||||
Capital withdrawals | - | (7,242,831 | ) | (7,682.3406 | ) | (2,874,417 | ) | (2,879.3590 | ) | (31,348,974 | ) | (30,995.9188 | ) | (41,466,222 | ) | |||||||||||||||||
Net income | 83,255 | 2,676,082 | - | 401,740 | - | 770,558 | - | 3,931,635 | ||||||||||||||||||||||||
PARTNERS' CAPITAL — March 31, 2013 | $ | 3,311,578 | $ | 172,142,712 | 182,012.2178 | $ | 18,304,695 | 18,274.2023 | $ | 6,128,762 | 6,062.1842 | $ | 199,887,747 | |||||||||||||||||||
Net Asset Value per Unit at March 31, 2013 | $ | 945.78 | $ | 1,001.67 | $ | 1,010.98 |
General | Limited Partners | |||||||||||||||||||||||||||||||
Partner | Series A | Series B | Series C | Total | ||||||||||||||||||||||||||||
Amount | Amount | Units | Amount | Units | Amount | Units | Amount | |||||||||||||||||||||||||
PARTNERS' CAPITAL — December 31, 2011 | $ | 3,463,815 | $ | 166,336,096 | 159,942.5316 | $ | 22,643,903 | 21,012.8097 | $ | 43,576,009 | 40,189.9735 | $ | 236,019,823 | |||||||||||||||||||
Capital contributions | - | 12,898,335 | 12,727.3098 | 2,906,745 | 2,758.9000 | 808,398 | 771.8200 | 16,613,478 | ||||||||||||||||||||||||
Capital withdrawals | - | (3,983,105 | ) | (4,075.1998 | ) | (910,911 | ) | (904.0500 | ) | (332,459 | ) | (319.2700 | ) | (5,226,475 | ) | |||||||||||||||||
Net loss | (241,258 | ) | (13,753,105 | ) | - | (1,842,079 | ) | - | (3,258,602 | ) | - | (19,095,044 | ) | |||||||||||||||||||
PARTNERS' CAPITAL — March 31, 2012 | $ | 3,222,557 | $ | 161,498,221 | 168,594.6416 | $ | 22,797,658 | 22,867.6597 | $ | 40,793,346 | 40,642.5235 | $ | 228,311,782 | |||||||||||||||||||
Net Asset Value per Unit at March 31, 2012 | $ | 957.91 | $ | 996.94 | $ | 1,003.71 |
See notes to financial statements
5 |
Millburn Multi-Markets Fund L.P.
Statement of Financial Highlights (UNAUDITED)
For the three months ended March 31, 2013
The following information presents per unit operating performance data for each series for the three months ended March 31, 2013.
Per Unit Performance | ||||||||||||
(For a Unit Outstanding Throughout the Period) | Series A | Series B | Series C | |||||||||
NET ASSET VALUE PER UNIT — Beginning of period | $ | 931.26 | $ | 982.00 | $ | 990.51 | ||||||
INCOME (LOSS) ALLOCATED FROM THE MASTER FUND: | ||||||||||||
Net investment loss (1) | (11.50 | ) | (7.78 | ) | (6.98 | ) | ||||||
Total trading and investing gains (1) | 26.02 | 27.45 | 27.45 | |||||||||
Net income before profit share allocation from the Master Fund | 14.52 | 19.67 | 20.47 | |||||||||
Profit share allocation from the Master Fund (1) (6) | 0.00 | 0.00 | 0.00 | |||||||||
Net income from operations after profit share allocation from the Master Fund | 14.52 | 19.67 | 20.47 | |||||||||
NET ASSET VALUE PER UNIT — End of period | $ | 945.78 | $ | 1,001.67 | $ | 1,010.98 | ||||||
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) | 1.56 | % | 2.00 | % | 2.07 | % | ||||||
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6) | 0.00 | 0.00 | 0.00 | |||||||||
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) | 1.56 | % | 2.00 | % | 2.07 | % | ||||||
RATIOS TO AVERAGE NET ASSET VALUE: | ||||||||||||
Expenses (3) (4) (5) | 5.05 | % | 3.29 | % | 2.98 | % | ||||||
Profit share allocation from the Master Fund (2) (6) | 0.00 | 0.00 | 0.00 | |||||||||
Total expenses | 5.05 | % | 3.29 | % | 2.98 | % | ||||||
Net investment loss (3) (4) (5) | (4.88 | )% | (3.12 | )% | (2.82 | )% |
(1) | The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund. |
(5) | Excludes profit share allocation from the Master Fund. |
(6) | Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity. |
See notes to financial statements
6 |
Millburn Multi-Markets Fund L.P.
Statement of Financial Highlights (UNAUDITED)
For the three months ended March 31, 2012
The following information presents per unit operating performance data for each series for the three months ended March 31, 2012.
Per Unit Performance | ||||||||||||
(For a Unit Outstanding Throughout the Period) | Series A | Series B | Series C | |||||||||
NET ASSET VALUE PER UNIT — Beginning of period | $ | 1,039.97 | $ | 1,077.62 | $ | 1,084.25 | ||||||
LOSS ALLOCATED FROM THE MASTER FUND: | ||||||||||||
Net investment loss (1) | (11.51 | ) | (7.48 | ) | (6.89 | ) | ||||||
Total trading and investing losses (1) | (70.55 | ) | (73.20 | ) | (73.65 | ) | ||||||
Net loss before profit share allocation from the Master Fund | (82.06 | ) | (80.68 | ) | (80.54 | ) | ||||||
Profit share allocation from the Master Fund (1) (6) | 0.00 | 0.00 | 0.00 | |||||||||
Net loss from operations after profit share allocation from the Master Fund | (82.06 | ) | (80.68 | ) | (80.54 | ) | ||||||
NET ASSET VALUE PER UNIT — End of period | $ | 957.91 | $ | 996.94 | $ | 1,003.71 | ||||||
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) | (7.89 | )% | (7.49 | )% | (7.43 | )% | ||||||
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6) | 0.00 | 0.00 | 0.00 | |||||||||
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) | (7.89 | )% | (7.49 | )% | (7.43 | )% | ||||||
RATIOS TO AVERAGE NET ASSET VALUE: | ||||||||||||
Expenses (3) (4) (5) | 4.82 | % | 3.07 | % | 2.81 | % | ||||||
Profit share allocation from the Master Fund (2) (6) | 0.00 | 0.00 | 0.00 | |||||||||
Total expenses | 4.82 | % | 3.07 | % | 2.81 | % | ||||||
Net investment loss (3) (4) (5) | (4.68 | )% | (2.93 | )% | (2.68 | )% |
(1) | The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing losses is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund. |
(5) | Excludes profit share allocation from the Master Fund. |
(6) | Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity. |
See notes to financial statements
7 |
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Millburn Multi-Markets Fund L.P.’s (the “Partnership”) financial condition at March 31, 2013 and December 31, 2012 and the results of its operations for the three months ended March 31, 2013 and 2012 (unaudited).
These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Partnership’s 2012 annual report included in Form 10-K filed with the Securities and Exchange Commission. The December 31, 2012 information has been derived from the audited financial statements as of December 31, 2012.
The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”) requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.
The Partnership enters into contracts with various financial institutions that contain a variety of indemnifications. The Partnership’s maximum exposure under these arrangements is unknown. However, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
The Income Taxes topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification”) clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2009 through 2012, for the U.S. Federal jurisdiction, the New York, Connecticut and Delaware state jurisdictions, and the New York City jurisdiction, there are no uncertain tax positions. The Partnership is treated as a limited partnership for federal and state income tax reporting purposes.
There have been no material changes with respect to the Partnership’s critical accounting policies, off-balance sheet arrangements or disclosure of contractual obligations as reported in the Partnership's Annual Report on Form 10-K for the fiscal year 2012.
2. INVESTMENT IN MILLBURN MULTI-MARKETS TRADING L.P.
The Partnership invests substantially all of its assets in Millburn Multi-Markets Trading L.P. (the “Master Fund”). The Partnership’s ownership percentage of the Master Fund at March 31, 2013 and December 31, 2012 was 66.22% and 68.43%, respectively, of total partners’ capital of the Master Fund. See the attached financial statements of the Master Fund.
3. RELATED PARTY TRANSACTIONS
The Partnership bears its own expenses, including, but not limited to, periodic legal, accounting and filing fees. Total operating expenses related to investors in the Partnership (including their pro-rata share of Master Fund expenses) are not expected to exceed 1/2 of 1% per annum of the Partnership’s average month-end partners’ capital.
During any time in which a third-party administrator is providing services to the Master Fund, as is currently the case, the General Partner is paid a monthly Administration Fee for administration services it provides calculated as a percentage of the month-end net asset value (prior to reduction for withdrawals or redemptions, management fees, amounts payable to selling agents and the administration fee then being calculated) of the Master Fund equal to 0.05% per annum of the Master Fund’s average net assets. The Partnership is allocated its pro rata portion of the administration fee which is charged at the Master Fund level. As of March 31, 2013 and December 31, 2012, $55,915 and $15,997, respectively, was payable by the Master Fund to the General Partner and is included in “accrued expenses” in the Master Fund’s Statements of Financial Condition.
8 |
The General Partner has paid expenses incurred in connection with the organization of the Partnership and the initial offering of the units of limited partnership (“Units”). The total amount paid by the General Partner was $191,967. The Master Fund, on behalf of the Partnership, is reimbursing the General Partner for these costs in 60 equal monthly installments of $3,199 which began on August 1, 2009. However, to the extent that for any month the $3,199 exceeds 1/12 of 0.05% (0.05% per annum) of the Partnership’s month-end net asset value, such excess will not be reimbursed by the Partnership but will be absorbed by the General Partner. As of March 31, 2013, pursuant to this calculation, $30,987 has been borne by the General Partner and will not be reimbursed by the Partnership. For each of the three months ended March 31, 2013 and 2012, the costs incurred by the Partnership were $9,597. Organization and initial offering costs are included in “administrative and operating expenses” in the Master Fund’s Statements of Operations. Accordingly, as of March 31, 2013 and December 31, 2012, $19,194 and $9,597, were payable by the Master Fund to the General Partner as reimbursement for such costs and are included in “accrued expenses” in the Master Fund’s Statement of Financial Condition.
Series A Unitholders that redeem Units at or prior to the end of the first eleven months after such Units are sold shall be assessed redemption charges calculated based on their redeemed Units' net asset value as of the date of redemption. All redemption charges will be paid to the General Partner. At March 31, 2013 and December 31, 2012, $478 and $2,510 were owed to the General Partner, respectively.
4. FINANCIAL HIGHLIGHTS
Per Unit operating performance for Series A, Series B and Series C Units is calculated based on Unitholders’ partners’ capital for each series taken as a whole utilizing the beginning and ending net asset value per unit and weighted average number of units during the quarter. Weighted average number of units of each series is detailed below.
Three months ending March 31, | ||||||||
2013 | 2012 | |||||||
Series A | 182,971.352 | 167,836.058 | ||||||
Series B | 19,543.610 | 22,840.188 | ||||||
Series C | 17,088.569 | 40,490.795 |
9 |
Millburn Multi-Markets Trading L.P. | ||
Financial statements | ||
For the three months ended March 31, 2013 and 2012 (unaudited) | ||
Statements of Financial Condition (a) | 11 | |
Condensed Schedules of Investments (a) | 12 | |
Statements of Operations (b) | 16 | |
Statements of Changes in Partners' Capital (b) | 17 | |
Statements of Financial Highlights (b) | 18 | |
Notes to Financial Statements | 20 |
(a) At March 31, 2013 and December 31, 2012 (unaudited)
(b) For the three months ended March 31, 2013 and 2012 (unaudited)
10 |
Millburn Multi-Markets Trading L.P.
Statements of Financial Condition (UNAUDITED)
March 31 | December 31 | |||||||
2013 | 2012 | |||||||
ASSETS | ||||||||
EQUITY IN TRADING ACCOUNTS: | ||||||||
Investments in U.S. Treasury notes–at fair value (amortized cost $52,082,359 and $57,790,260) | $ | 52,103,870 | $ | 57,802,756 | ||||
Net unrealized appreciation on open futures and forward currency contracts | 3,607,669 | 4,087,228 | ||||||
Due from brokers | 11,032,934 | 5,627,293 | ||||||
Cash denominated in foreign currencies (cost $3,271,066 and $4,037,140) | 3,216,652 | 4,058,372 | ||||||
Total equity in trading accounts | 69,961,125 | 71,575,649 | ||||||
INVESTMENTS IN U.S. TREASURY NOTES–at fair value (amortized cost $225,132,430 and $252,630,704) | 225,193,793 | 252,687,230 | ||||||
CASH AND CASH EQUIVALENTS | 15,784,985 | 17,495,371 | ||||||
ACCRUED INTEREST RECEIVABLE | 686,068 | 1,702,482 | ||||||
DUE FROM MILLBURN MULTI-MARKETS LTD. | 2,385 | 150 | ||||||
DUE FROM MILLBURN MULTI-MARKETS FUND L.P. | 1,521 | 2,442 | ||||||
TOTAL | $ | 311,629,877 | $ | 343,463,324 | ||||
LIABILITIES AND PARTNERS' CAPITAL | ||||||||
LIABILITIES: | ||||||||
Net unrealized depreciation on open futures and forward currency contracts | $ | 2,842,454 | $ | 829,940 | ||||
Cash denominated in foreign currencies (cost -$371,376 and -$527,192) | 370,203 | 531,601 | ||||||
Capital contributions received in advance | - | 88,061 | ||||||
Capital withdrawals payable | 5,001,608 | 6,313,976 | ||||||
Management fee payable | 414,597 | 458,893 | ||||||
Selling commissions payable | 297,760 | 296,630 | ||||||
Accrued expenses | 562,982 | 206,798 | ||||||
Due to broker | - | 96,357 | ||||||
Commissions and other trading fees on open futures contracts | 58,488 | 74,020 | ||||||
Due to General Partner | 478 | 2,510 | ||||||
Other liabilities | 208,960 | - | ||||||
Total liabilities | 9,757,530 | 8,898,786 | ||||||
PARTNERS' CAPITAL | 301,872,347 | 334,564,538 | ||||||
TOTAL | $ | 311,629,877 | $ | 343,463,324 |
See notes to financial statements
11 |
Millburn Multi-Markets Trading L.P.
Condensed Schedule of Investments (UNAUDITED)
March 31, 2013
FUTURES AND FORWARD CURRENCY CONTRACTS | Net Unrealized Appreciation/ (Depreciation) as a % of Partners' Capital | Net Unrealized Appreciation/ (Depreciation) | ||||||
FUTURES CONTRACTS | ||||||||
Long futures contracts: | ||||||||
Energies | 0.34 | % | $ | 1,038,485 | ||||
Grains | (0.15 | ) | (442,263 | ) | ||||
Interest rates: | ||||||||
2 Year U.S. Treasury Note (1,800 contracts, settlement date June 2013) | 0.02 | 66,111 | ||||||
5 Year U.S. Treasury Note (1,062 contracts, settlement date June 2013) | 0.05 | 152,008 | ||||||
10 Year U.S. Treasury Note (454 contracts, settlement date June 2013) | 0.04 | 130,313 | ||||||
30 Year U.S. Treasury Bond (20 contracts, settlement date June 2013) | (0.00 | ) | (2,500 | ) | ||||
Other interest rates | 0.63 | 1,882,881 | ||||||
Total interest rates | 0.74 | 2,228,813 | ||||||
Livestock | 0.01 | 41,680 | ||||||
Metals | (0.48 | ) | (1,459,056 | ) | ||||
Softs | 0.09 | 270,660 | ||||||
Stock indices | (0.32 | ) | (979,847 | ) | ||||
Total long futures contracts | 0.23 | 698,472 | ||||||
Short futures contracts: | ||||||||
Energies | (0.27 | ) | (826,454 | ) | ||||
Grains | 0.38 | 1,139,536 | ||||||
Interest rates | (0.08 | ) | (236,947 | ) | ||||
Livestock | (0.11 | ) | (315,670 | ) | ||||
Metals | 0.53 | 1,608,713 | ||||||
Softs | 0.13 | 379,469 | ||||||
Stock indices | 0.08 | 249,560 | ||||||
Total short futures contracts | 0.66 | 1,998,207 | ||||||
TOTAL INVESTMENTS IN FUTURES CONTRACTS - Net | 0.89 | 2,696,679 | ||||||
FORWARD CURRENCY CONTRACTS: | ||||||||
Total long forward currency contracts | (0.53 | ) | (1,585,421 | ) | ||||
Total short forward currency contracts | (0.11 | ) | (346,043 | ) | ||||
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS - Net | (0.64 | ) | (1,931,464 | ) | ||||
TOTAL | 0.25 | % | $ | 765,215 |
(Continued)
12 |
Millburn Multi-Markets Trading L.P.
Condensed Schedule of Investments (UNAUDITED)
March 31, 2013
U.S. TREASURY NOTES
Face Amount | Description | Fair Value as a % of Partners' Capital | Fair Value | |||||||||
$ | 106,700,000 | U.S. Treasury notes, 3.375%, 07/31/2013 | 35.73 | % | $ | 107,867,031 | ||||||
76,700,000 | U.S. Treasury notes, 0.125%, 09/30/2013 | 25.41 | 76,705,992 | |||||||||
27,240,000 | U.S. Treasury notes, 0.500%, 11/15/2013 | 9.05 | 27,304,376 | |||||||||
64,750,000 | U.S. Treasury notes, 0.125%, 03/15/2014 | 21.67 | 65,420,264 | |||||||||
Total investments in U.S. Treasury notes (amortized cost $277,214,789) | 91.86 | % | $ | 277,297,663 |
See notes to financial statements | (Concluded) |
13 |
Millburn Multi-Markets Trading L.P.
Condensed Schedule of Investments
December 31, 2012
FUTURES AND FORWARD CURRENCY CONTRACTS | Net Unrealized Appreciation/ (Depreciation) as a % of Partners' Capital | Net Unrealized Appreciation/ (Depreciation) | ||||||
FUTURES CONTRACTS | ||||||||
Long futures contracts: | ||||||||
Energies | 0.42 | % | $ | 1,402,416 | ||||
Grains | (0.30 | ) | (996,610 | ) | ||||
Interest rates: | ||||||||
2 Year U.S. Treasury Note (2,580 contracts, settlement date March 2013) | 0.03 | 110,717 | ||||||
5 Year U.S. Treasury Note (1,008 contracts, settlement date March 2013) | 0.01 | 17,273 | ||||||
10 Year U.S. Treasury Note (480 contracts, settlement date March 2013) | (0.03 | ) | (99,844 | ) | ||||
30 Year U.S. Treasury Bond (165 contracts, settlement date March 2013) | (0.01 | ) | (30,375 | ) | ||||
Other interest rates | 0.39 | 1,306,819 | ||||||
Total interest rates | 0.39 | 1,304,590 | ||||||
Livestock | (0.04 | ) | (149,420 | ) | ||||
Metals | 0.09 | 293,489 | ||||||
Softs | 0.01 | 26,112 | ||||||
Stock indices | 0.54 | 1,829,181 | ||||||
Total long futures contracts | 1.11 | 3,709,758 | ||||||
Short futures contracts: | ||||||||
Energies | (0.51 | ) | (1,699,188 | ) | ||||
Grains | 0.22 | 720,496 | ||||||
Interest rates | 0.00 | 2,288 | ||||||
Livestock | (0.00 | ) | (7,380 | ) | ||||
Metals | (0.24 | ) | (816,189 | ) | ||||
Softs | 0.05 | 177,792 | ||||||
Stock indices | (0.03 | ) | (86,840 | ) | ||||
Total short futures contracts | (0.51 | ) | (1,709,021 | ) | ||||
TOTAL INVESTMENTS IN FUTURES CONTRACTS - Net | 0.60 | 2,000,737 | ||||||
FORWARD CURRENCY CONTRACTS: | ||||||||
Total long forward currency contracts | (0.05 | ) | (153,212 | ) | ||||
Total short forward currency contracts | 0.42 | 1,409,763 | ||||||
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS - Net | 0.37 | 1,256,551 | ||||||
TOTAL | 0.97 | % | $ | 3,257,288 |
(Continued)
14 |
Millburn Multi-Markets Trading L.P.
Condensed Schedule of Investments
December 31, 2012
U.S. TREASURY NOTES
Face Amount | Description | Fair Value as a % of Partners' Capital | Fair Value | |||||||||
$ | 67,740,000 | U.S. Treasury notes, 0.625%, 02/28/2013 | 20.27 | % | $ | 67,800,860 | ||||||
106,700,000 | U.S. Treasury notes, 3.375%, 07/31/2013 | 32.49 | 108,696,457 | |||||||||
106,700,000 | U.S. Treasury notes, 0.125%, 09/30/2013 | 31.88 | 106,674,992 | |||||||||
27,240,000 | U.S. Treasury notes, 0.500%, 11/15/2013 | 8.16 | 27,317,677 | |||||||||
Total investments in U.S. Treasury notes (amortized cost $310,420,964) | 92.80 | % | $ | 310,489,986 |
See notes to financial statements | (Concluded) |
15 |
Millburn Multi-Markets Trading L.P.
Statements of Operations (UNAUDITED)
For the three months ended | ||||||||
March 31 | March 31 | |||||||
2013 | 2012 | |||||||
INVESTMENT INCOME: | ||||||||
Interest income | $ | 136,417 | $ | 134,669 | ||||
EXPENSES: | ||||||||
Brokerage commissions | 395,983 | 269,964 | ||||||
Management fees | 1,298,323 | 1,787,284 | ||||||
Selling commissions and platform fees | 885,973 | 839,484 | ||||||
Administrative and operating expenses | 357,056 | 404,038 | ||||||
Custody fees and other expenses | 15,265 | 21,521 | ||||||
Total expenses | 2,952,600 | 3,322,291 | ||||||
NET INVESTMENT LOSS | (2,816,183 | ) | (3,187,622 | ) | ||||
NET REALIZED AND UNREALIZED GAINS (LOSSES): | ||||||||
Net realized gains (losses) on closed positions: | ||||||||
Futures and forward currency contracts | 11,834,568 | (16,074,518 | ) | |||||
Foreign exchange translation | (50,543 | ) | (58,663 | ) | ||||
Net change in unrealized: | ||||||||
Futures and forward currency contracts | (2,492,073 | ) | (12,128,488 | ) | ||||
Foreign exchange translation | (70,064 | ) | (1,590 | ) | ||||
Net gains (losses) from U.S. Treasury notes | ||||||||
Realized | 7,516 | (5,370 | ) | |||||
Net change in unrealized | 13,852 | (97,029 | ) | |||||
TOTAL NET REALIZED AND UNREALIZED GAINS (LOSSES) | 9,243,256 | (28,365,658 | ) | |||||
NET INCOME (LOSS) | 6,427,073 | (31,553,280 | ) | |||||
LESS PROFIT SHARE TO GENERAL PARTNER | 218,270 | - | ||||||
NET INCOME (LOSS) AFTER PROFIT SHARE TO GENERAL PARTNER | $ | 6,208,803 | $ | (31,553,280 | ) | |||
See notes to financial statements |
16 |
Millburn Multi-Markets Trading L.P.
Statements of Changes in Partners' Capital (UNAUDITED)
For the three months ended March 31, 2013:
Limited Partners | New Profit Memo Account | General Partner | Total | |||||||||||||
PARTNERS' CAPITAL- January 1, 2013 | $ | 332,882,210 | $ | - | $ | 1,682,328 | $ | 334,564,538 | ||||||||
Contributions | 9,105,190 | - | - | 9,105,190 | ||||||||||||
Withdrawals | (48,015,494 | ) | - | - | (48,015,494 | ) | ||||||||||
Net income | 6,382,462 | 68 | 44,543 | 6,427,073 | ||||||||||||
General Partner’s allocation – profit share | (218,270 | ) | 9,310 | - | (208,960 | ) | ||||||||||
PARTNERS' CAPITAL- March 31, 2013 | $ | 300,136,098 | $ | 9,378 | $ | 1,726,871 | $ | 301,872,347 |
For the three months ended March 31, 2012:
Limited Partners | New Profit Memo Account | General Partner | Total | |||||||||||||
PARTNERS' CAPITAL- January 1, 2012 | $ | 407,700,313 | $ | - | $ | 1,801,044 | $ | 409,501,357 | ||||||||
Contributions | 17,003,479 | - | - | 17,003,479 | ||||||||||||
Withdrawals | (21,320,655 | ) | - | - | (21,320,655 | ) | ||||||||||
Net loss | (31,428,952 | ) | - | (124,328 | ) | (31,553,280 | ) | |||||||||
PARTNERS' CAPITAL- March 31, 2012 | $ | 371,954,185 | $ | - | $ | 1,676,716 | $ | 373,630,901 |
See notes to financial statements
17 |
Millburn Multi-Markets Trading L.P.
Statements of Financial Highlights (UNAUDITED)
The following information presents financial highlights of a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and an annual profit share of 20% of Trading Profits (as defined in the Limited Partnership Agreement).
For the three months ended | ||||||||
March 31 2013 | March 31 2012 | |||||||
Total return before General Partner profit share allocation (3) | 2.14 | % | (7.37 | )% | ||||
Less: General Partner profit share allocation (3) | 0.00 | 0.00 | ||||||
Total return after General Partner profit share allocation (3) | 2.14 | % | (7.37 | )% | ||||
Ratios to average net asset value: | ||||||||
Expenses (1) (4) | 2.76 | % | 2.48 | % | ||||
General Partner profit share allocation (3) | 0.00 | 0.00 | ||||||
Total expenses (1) | 2.76 | % | 2.48 | % | ||||
Net investment loss (1) (2) (4) | (2.60 | )% | (2.36 | )% |
Total returns and the ratios to average net asset value are calculated for a Limited Partner. An individual Limited Partner's total returns and ratios may vary from the above total returns and ratios based on different management fee and General Partner profit share allocation agreements and the timing of contributions and withdrawals.
(1) | Includes the Partnership's proportionate share of expenses allocated from the Partnership's operations. |
(2) | Excludes General Partner profit share allocation and includes interest income. |
(3) | Not Annualized |
(4) | Annualized |
See notes to financial statements
18 |
Millburn Multi-Markets Trading L.P.
Statements of Financial Highlights (UNAUDITED)
The following information presents financial highlights for Limited Partners as a whole.
For the three months ended | ||||||||
March 31 | March 31 | |||||||
2013 | 2012 | |||||||
Total return before General Partner profit share allocation (3) | 1.90 | % | (7.54 | )% | ||||
Less: General Partner profit share allocation (3) | 0.07 | 0.00 | ||||||
Total return after General Partner profit share allocation (3) | 1.83 | % | (7.54 | )% | ||||
Ratios to average net asset value: | ||||||||
Expenses (1) (4) | 3.72 | % | 3.28 | % | ||||
General Partner profit share allocation (3) | 0.07 | 0.00 | ||||||
Total expenses (1) | 3.79 | % | 3.28 | % | ||||
Net investment loss (1) (2) (4) | (3.56 | )% | (3.16 | )% |
Total returns and the ratios to average net asset value are calculated for a Limited Partner. An individual Limited Partner's total returns and ratios may vary from the above total returns and ratios based on different management fee and General Partner profit share allocation agreements and the timing of contributions and withdrawals.
(1) | Includes the Partnership's proportionate share of expenses allocated from the Partnership's operations. |
(2) | Excludes General Partner profit share allocation and includes interest income. |
(3) | Not Annualized |
(4) | Annualized |
See notes to financial statements
19 |
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Master Fund engages in the speculative trading of futures and forward currency contracts and also acts as a master fund for the Partnership, Millburn Multi-Markets Ltd., a Cayman Islands exempted company (the “Cayman Feeder”) and Millburn Multi-Markets Low Vol SPC, a Cayman Islands Segregated Portfolio Company (the “Cayman SPC Feeder”).
The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Master Fund’s financial condition at March 31, 2013 (unaudited) and December 31, 2012 and the results of its operations for the three months ended March 31, 2013 and 2012 (unaudited).
These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Master Fund’s annual report for the year ended December 31, 2012 included in the Partnership’s annual report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2012 information has been derived from the audited financial statements as of December 31, 2012. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.
The Master Fund enters into contracts with various financial institutions that contain a variety of indemnifications. The Master Fund's maximum exposure under these arrangements is unknown. However, the Master Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
The Income Taxes topic of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Master Fund recognize in its financial statements the impact of any uncertain tax position. Based on a review of the Master Fund’s open tax years, 2009 through 2012, for the U.S. Federal jurisdiction, the New York, Connecticut and Delaware State jurisdictions, and the New York City jurisdiction, there are no uncertain tax positions. The Master Fund is treated as a limited partnership for federal and state income tax reporting purposes.
2. INVESTORS IN MILLBURN MULTI-MARKETS TRADING L.P.
The Partnership and the Cayman Feeder invest substantially all of their assets in the Master Fund, and the Cayman SPC Feeder invests approximately two-thirds of its assets in the Master Fund. At March 31, 2013 and December 31, 2012, the respective ownership percentages of the Master Fund are detailed below. The remaining interests are held by direct investors in the Partnership.
March 31, | December 31, | |||||||
2013 | 2012 | |||||||
Partnership | 66.22 | % | 68.43 | % | ||||
Cayman Feeder | 3.75 | % | 3.32 | % | ||||
Cayman SPC Feeder | 17.24 | % | 16.26 | % | ||||
Total | 87.21 | % | 88.01 | % |
The capital withdrawals payable at March 31, 2013 and December 31, 2012 were $5,001,608 and $6,313,976, respectively, detailed below. There were no redemptions payable to the Cayman Feeder at March 31, 2013 or December 31, 2012.
March 31, | December 31, | |||||||
2013 | 2012 | |||||||
Direct investors (1) | $ | 2,400,000 | $ | 719,707 | ||||
Partnership (2) | 2,446,281 | 5,594,269 | ||||||
Cayman SPC Feeder | 155,327 | - | ||||||
Total | $ | 5,001,608 | $ | 6,313,976 |
(1) Includes General Partner redemptions at December 31, 2012 of $249,786
(2) Net of redemption penalty payable at March 31, 2013 and December 31, 2012 of $478 and $2,510, respectively
20 |
The Master Fund bears expenses, including, but not limited to, periodic legal, accounting and filing fees, up to an amount equal to 1/4 of 1% per annum of average net assets of the Master Fund (the “Expense Cap”). Amounts subject to the Expense Cap include expenses incurred at the Master Fund and Cayman Feeder level and the Administration Fee due to the General Partner, as general partner of the Master Fund. The General Partner bears any excess over such amounts.
3. FAIR VALUE
The Fair Value Measurements and Disclosures topic of the Codification defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The three levels of the fair value hierarchy are described below:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly;
Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
In determining fair value, the Master Fund separates its investments into two categories: cash instruments and derivative contracts.
Cash Instruments. The Master Fund’s cash instruments are generally classified within Level 1 of the fair value hierarchy because they are typically valued using quoted market prices. The types of instruments valued based on quoted market prices in active markets include U.S. government obligations. The General Partner does not adjust the quoted price for such instruments, even in situations where the Master Fund holds a large position and a sale could reasonably impact the quoted price.
Derivative Contracts. Derivative contracts can be exchange-traded or over-the-counter (“OTC”). Exchange-traded futures contracts are valued based on quoted closing settlement prices and typically fall within Level 1 of the fair value hierarchy.
Spot currency contracts are valued based on current market prices (“Spot Price”). Forward currency contracts are valued based on pricing models that consider the Spot Price plus the financing cost or benefit (“Forward Point”). Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Master Fund may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of months from the date the forward currency contract is being valued to its maturity date (“Months to Maturity”), then identifying the forward currency contracts for the two forward months that are closest to the Months to Maturity (“Forward Month Contracts”). Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.
During the three months ended March 31, 2013 and 2012, there were no transfers of assets or liabilities between Level 1 and Level 2. The following tables represent the Master Fund’s investments by hierarchical level as of March 31, 2013 and December 31, 2012 in valuing the Master Fund’s investments at fair value. At March 31, 2013 and December 31, 2012, the Master Fund had no assets or liabilities in Level 3.
Financial assets and liabilities at fair value as of March 31, 2013
Level 1 | Level 2 | Total | ||||||||||
U.S. Treasury notes (1) | $ | 277,297,663 | $ | - | $ | 277,297,663 | ||||||
Exchange-traded futures contracts | ||||||||||||
Energies | 212,031 | - | 212,031 | |||||||||
Grains | 697,273 | - | 697,273 | |||||||||
Interest rates | 1,991,866 | - | 1,991,866 | |||||||||
Livestock | (273,990 | ) | - | (273,990 | ) | |||||||
Metals | 149,657 | - | 149,657 | |||||||||
Softs | 650,129 | - | 650,129 | |||||||||
Stock indices | (730,287 | ) | - | (730,287 | ) | |||||||
Total exchange-traded futures contracts | 2,696,679 | - | 2,696,679 | |||||||||
Over-the-counter forward currency contracts | - | (1,931,464 | ) | (1,931,464 | ) | |||||||
Total futures and forward currency contracts (2) | 2,696,679 | (1,931,464 | ) | 765,215 | ||||||||
Total financial assets and liabilities at fair value | $ | 279,994,342 | $ | (1,931,464 | ) | $ | 278,062,878 | |||||
Per line item in Statements of Financial Condition | ||||||||||||
(1) | ||||||||||||
Investments in U.S. Treasury notes held in brokers' trading accounts as collateral | $ | 52,103,870 | ||||||||||
Investments in U.S. Treasury notes held in custody | 225,193,793 | |||||||||||
Total investments in U.S. Treasury notes | $ | 277,297,663 | ||||||||||
(2) | ||||||||||||
Net unrealized appreciation on futures and forward currency contracts | $ | 3,607,669 | ||||||||||
Net unrealized depreciation on futures and forward currency contracts | (2,842,454 | ) | ||||||||||
Total unrealized appreciation on futures and forward currency contracts | $ | 765,215 |
21 |
Financial assets and liabilities at fair value as of December 31, 2012
Level 1 | Level 2 | Total | ||||||||||
U.S. Treasury notes (1) | $ | 310,489,986 | $ | - | $ | 310,489,986 | ||||||
Exchange-traded futures contracts | ||||||||||||
Energies | (296,772 | ) | - | (296,772 | ) | |||||||
Grains | (276,114 | ) | - | (276,114 | ) | |||||||
Interest rates | 1,306,878 | - | 1,306,878 | |||||||||
Livestock | (156,800 | ) | - | (156,800 | ) | |||||||
Metals | (522,700 | ) | - | (522,700 | ) | |||||||
Softs | 203,904 | - | 203,904 | |||||||||
Stock indices | 1,742,341 | - | 1,742,341 | |||||||||
Total exchange-traded futures contracts | 2,000,737 | - | 2,000,737 | |||||||||
Over-the-counter forward currency contracts | - | 1,256,551 | 1,256,551 | |||||||||
Total futures and forward currency contracts (2) | 2,000,737 | 1,256,551 | 3,257,288 | |||||||||
Total financial assets and liabilities at fair value | $ | 312,490,723 | $ | 1,256,551 | $ | 313,747,274 | ||||||
Per line item in Statements of Financial Condition | ||||||||||||
(1) | ||||||||||||
Investments in U.S. Treasury notes held in brokers' trading accounts as collateral | $ | 57,802,756 | ||||||||||
Investments in U.S. Treasury notes held in custody | 252,687,230 | |||||||||||
Total investments in U.S. Treasury notes | $ | 310,489,986 | ||||||||||
(2) | ||||||||||||
Net unrealized appreciation on futures and forward currency contracts | $ | 4,087,228 | ||||||||||
Net unrealized depreciation on futures and forward currency contracts | (829,940 | ) | ||||||||||
Total unrealized appreciation on futures and forward currency contracts | $ | 3,257,288 |
4. DERIVATIVE INSTRUMENTS
The Derivatives and Hedging topic of the Codification requires qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.
In December 2011, FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities” which created a new disclosure requirement about the nature of an entity’s rights of setoff and the related arrangement associated with its financial instruments and derivative instruments. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the Statements of Financial Condition and instruments and transactions subject to an agreement similar to a master netting agreement. The following tables present gross amounts of assets or liabilities which qualify for offset as presented in the Statements of Financial Condition at March 31, 2013 and December 31, 2012.
22 |
Offsetting of derivative assets and liabilities at March 31, 2013 | ||||||||||||
Assets | Gross amounts of recognized assets | Gross amounts offset in the Statements of Financial Condition | Net amounts of assets presented in the Statements of Financial Condition | |||||||||
Futures contracts | ||||||||||||
Counterparty B | $ | 2,839,884 | $ | (1,530,074 | ) | $ | 1,309,810 | |||||
Counterparty C | 3,484,319 | (1,386,523 | ) | 2,097,796 | ||||||||
Counterparty D | 1,219,845 | (1,056,438 | ) | 163,407 | ||||||||
Total futures contracts | 7,544,048 | (3,973,035 | ) | 3,571,013 | ||||||||
Forward currency contracts | ||||||||||||
Counterparty G | 55,584 | (18,928 | ) | 36,656 | ||||||||
Total assets | $ | 7,599,632 | $ | (3,991,963 | ) | $ | 3,607,669 |
Liabilities | Gross amounts offset in the Statements of Financial Condition | Gross amounts of recognized liabilities | Net amounts of liabilities presented in the Statements of Financial Condition | |||||||||
Futures contracts | ||||||||||||
Counterparty A | $ | 828,651 | $ | (1,360,441 | ) | $ | (531,790 | ) | ||||
Counterparty E | 850,841 | (1,193,385 | ) | (342,544 | ) | |||||||
Total futures contracts | 1,679,492 | (2,553,826 | ) | (874,334 | ) | |||||||
Forward currency contracts | ||||||||||||
Counterparty F | 488,128 | (857,401 | ) | (369,273 | ) | |||||||
Counterparty H | 2,011,972 | (3,610,819 | ) | (1,598,847 | ) | |||||||
Total forward currency contracts | 2,500,100 | (4,468,220 | ) | (1,968,120 | ) | |||||||
Total liabilities | $ | 4,179,592 | $ | (7,022,046 | ) | $ | (2,842,454 | ) |
23 |
Offsetting of derivative assets and liabilities at December 31, 2012 | ||||||||||||
Assets | Gross amounts of recognized assets | Gross amounts offset in the Statements of Financial Condition | Net amounts of assets presented in the Statements of Financial Condition | |||||||||
Futures contracts | ||||||||||||
Counterparty A | $ | 711,097 | $ | (379,852 | ) | $ | 331,245 | |||||
Counterparty B | 3,544,066 | (2,246,978 | ) | 1,297,088 | ||||||||
Counterparty D | 1,382,796 | (424,990 | ) | 957,806 | ||||||||
Total futures contracts | 5,637,959 | (3,051,820 | ) | 2,586,139 | ||||||||
Forward currency contracts | ||||||||||||
Counterparty F | 2,097,368 | (596,279 | ) | 1,501,089 | ||||||||
Total assets | $ | 7,735,327 | $ | (3,648,099 | ) | $ | 4,087,228 | |||||
Liabilities | Gross amounts offset in the Statements of Financial Condition | Gross amounts of recognized liabilities | Net amounts of liabilities presented in the Statements of Financial Condition | |||||||||
Futures contracts | ||||||||||||
Counterparty C | $ | 2,400,831 | $ | (2,695,736 | ) | $ | (294,905 | ) | ||||
Counterparty E | 374,986 | (665,485 | ) | (290,499 | ) | |||||||
Total futures contracts | 2,775,817 | (3,361,221 | ) | (585,404 | ) | |||||||
Forward currency contracts | ||||||||||||
Counterparty G | 6,174 | (17,311 | ) | (11,137 | ) | |||||||
Counterparty H | 6,250,629 | (6,484,028 | ) | (233,399 | ) | |||||||
Total forward currency contracts | 6,256,803 | (6,501,339 | ) | (244,536 | ) | |||||||
Total liabilities | $ | 9,032,620 | $ | (9,862,560 | ) | $ | (829,940 | ) |
The Master Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Master Fund’s open positions and the liquidity of the markets in which it trades.
The Master Fund engages in the speculative trading of futures and forward contracts on interest rates, grains, softs, currencies, metals, energies, livestock and stock indices. The following were the primary trading risk exposures of the Master Fund at March 31, 2013, by market sector:
Agricultural (grains, livestock and softs) – The Master Fund’s primary exposure is to agricultural price movements, which are often directly affected by severe or unexpected weather conditions as well as supply and demand factors.
Currencies – Exchange rate risk is a principal market exposure of the Master Fund. The Master Fund’s currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. The fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Master Fund trades in a large number of currencies, including cross-rates—e.g., positions between two currencies other than the U.S. dollar.
Energies – The Master Fund’s primary energy market exposure is to gas and oil price movements, often resulting from political developments in the Middle East and economic conditions worldwide. Energy prices are volatile and substantial profits and losses have been and are expected to continue to be experienced in this sector.
Interest rates – Interest rate movements directly affect the price of the sovereign bond futures positions held by the Master Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries may materially impact the Master Fund’s profitability. The Master Fund’s primary interest rate exposure is to interest rate fluctuations in countries or regions including Australia, Canada, Japan, Switzerland, the United Kingdom, the U.S. and the Eurozone. However, the Master Fund also may take positions in futures contracts on the government debt of other nations. The General Partner anticipates that interest rates in these industrialized countries or areas, both long-term and short-term, will remain the primary interest rate market exposure of the Master Fund for the foreseeable future.
Metals – The Master Fund’s metals market exposure is to fluctuations in the price of aluminum, copper, gold, lead, nickel, platinum, silver, tin and zinc.
Stock indices – The Master Fund’s equity exposure, through stock index futures, is to equity price risk in the major industrialized countries as well as other countries.
24 |
The Derivatives and Hedging topic of the Codification requires entities to recognize in the Statements of Financial Condition all derivative contracts as assets or liabilities. Fair values of futures and forward currency contracts in an asset position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized appreciation on open futures and forward currency contracts.” Fair values of futures and forward currency contracts in a liability position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized depreciation on open futures and forward currency contracts.” The Master Fund’s policy regarding fair value measurement is discussed in the Fair Value and Disclosures note, contained herein.
Since the derivatives held or sold by the Master Fund are for speculative trading purposes, the derivative instruments are not designated as hedging instruments under the provisions of the Derivatives and Hedging guidance. Accordingly, all realized gains and losses, as well as any change in net unrealized gains or losses on open positions from the preceding period, are recognized as part of the Master Fund’s trading gains and losses in the Statements of Operations.
The following tables present the fair value of open futures and forward currency contracts, held long or sold short, at March 31, 2013 and December 31, 2012. Fair value is presented on a gross basis even though the contracts are subject to master netting agreements and qualify for net presentation in the Master Fund’s Statements of Financial Condition.
Fair value of futures and forward currency contracts at March 31, 2013
Net Unrealized Gain (Loss) | ||||||||||||||||||||
Fair Value - Long Positions | Fair Value - Short Positions | on Open | ||||||||||||||||||
Sector | Gains | Losses | Gains | Losses | Positions | |||||||||||||||
Futures contracts: | ||||||||||||||||||||
Energies | $ | 1,085,441 | $ | (46,956 | ) | $ | 12,080 | $ | (838,534 | ) | $ | 212,031 | ||||||||
Grains | 28,603 | (470,866 | ) | 1,198,399 | (58,863 | ) | 697,273 | |||||||||||||
Interest rates | 2,694,979 | (466,166 | ) | 557 | (237,504 | ) | 1,991,866 | |||||||||||||
Livestock | 41,680 | - | 800 | (316,470 | ) | (273,990 | ) | |||||||||||||
Metals | 50,820 | (1,509,876 | ) | 1,643,028 | (34,315 | ) | 149,657 | |||||||||||||
Softs | 470,023 | (199,363 | ) | 677,765 | (298,296 | ) | 650,129 | |||||||||||||
Stock indices | 1,069,805 | (2,049,652 | ) | 249,560 | - | (730,287 | ) | |||||||||||||
Total futures contracts | 5,441,351 | (4,742,879 | ) | 3,782,189 | (1,783,982 | ) | 2,696,679 | |||||||||||||
Forward currency contracts | 1,326,955 | (2,912,376 | ) | 1,228,729 | (1,574,772 | ) | (1,931,464 | ) | ||||||||||||
Total futures and forward currency contracts | $ | 6,768,306 | $ | (7,655,255 | ) | $ | 5,010,918 | $ | (3,358,754 | ) | $ | 765,215 |
Fair value of futures and forward currency contracts at December 31, 2012
Net Unrealized Gain (Loss) | ||||||||||||||||||||
Fair Value - Long Positions | Fair Value - Short Positions | on Open | ||||||||||||||||||
Sector | Gains | Losses | Gains | Losses | Positions | |||||||||||||||
Futures contracts: | ||||||||||||||||||||
Energies | $ | 1,475,418 | $ | (73,002 | ) | $ | 11,630 | $ | (1,710,818 | ) | $ | (296,772 | ) | |||||||
Grains | - | (996,610 | ) | 720,496 | - | (276,114 | ) | |||||||||||||
Interest rates | 2,327,068 | (1,022,478 | ) | 2,288 | - | 1,306,878 | ||||||||||||||
Livestock | - | (149,420 | ) | - | (7,380 | ) | (156,800 | ) | ||||||||||||
Metals | 506,951 | (213,462 | ) | - | (816,189 | ) | (522,700 | ) | ||||||||||||
Softs | 27,532 | (1,420 | ) | 581,411 | (403,619 | ) | 203,904 | |||||||||||||
Stock indices | 2,089,846 | (260,665 | ) | - | (86,840 | ) | 1,742,341 | |||||||||||||
Total futures contracts | 6,426,815 | (2,717,057 | ) | 1,315,825 | (3,024,846 | ) | 2,000,737 | |||||||||||||
Forward currency contracts | 3,645,759 | (3,798,971 | ) | 3,974,478 | (2,564,715 | ) | 1,256,551 | |||||||||||||
Total futures and forward currency contracts | $ | 10,072,574 | $ | (6,516,028 | ) | $ | 5,290,303 | $ | (5,589,561 | ) | $ | 3,257,288 |
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The effect of trading futures and forward currency contracts is represented on the Master Fund’s Statements of Operations for the three months ended March 31, 2013 and 2012 as “Net realized gains (losses) on closed positions: Futures and forward currency contracts” and “Net change in unrealized: Futures and forward currency contracts.” These trading gains and losses are detailed below.
Trading gains (losses) of futures and forward currency contracts for the three months ended March 31, 2013 and 2012
Sector | Three months ended: March 31, 2013 | Three months ended: March 31, 2012 | ||||||
Futures contracts: | ||||||||
Energies | $ | (942,948 | ) | $ | 4,033,488 | |||
Grains | (247,514 | ) | (2,553,494 | ) | ||||
Interest rates | (3,702,486 | ) | (8,828,619 | ) | ||||
Livestock | (718,950 | ) | (559,160 | ) | ||||
Metals | (1,686,965 | ) | (5,316,867 | ) | ||||
Softs | 1,010,141 | (76,790 | ) | |||||
Stock indices | 14,577,872 | (2,400,138 | ) | |||||
Total futures contracts | 8,289,150 | (15,701,580 | ) | |||||
Forward currency contracts | 1,053,345 | (12,501,426 | ) | |||||
Total futures and forward currency contracts | $ | 9,342,495 | $ | (28,203,006 | ) |
For the three months ended March 31, 2013, the monthly average number of futures contracts bought and sold was 33,705 and 36,290, respectively, and the monthly average notional value of forward currency contracts traded was approximately $1,183,000,000. Over the same period in 2012, the monthly average of futures contracts bought and sold was 26,831 and 24,119, respectively, and the monthly average notional value of forward currency contracts traded was approximately $1,297,000,000.
CONCENTRATION OF CREDIT RISK
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. Credit risk is normally reduced to the extent that an exchange or clearing organization acts as a counterparty to futures transactions since typically the collective credit of the members of the exchange is pledged to support the financial integrity of the exchange.
The General Partner seeks to minimize credit risk primarily by depositing and maintaining the Master Fund’s assets at financial institutions and trading counterparties which the General Partner believes to be creditworthy. In addition, for OTC forward currency contracts, the Master Fund enters into master netting agreements with its counterparties. Collateral posted at the various counterparties for trading of futures and forward currency contracts includes cash and U.S. Treasury notes.
The Master Fund’s forward currency trading activities are cleared by Deutsche Bank AG (“DB”), Morgan Stanley & Co. LLC (“MS”) and Barclays Bank PLC (“BB”). The Master Fund’s concentration of credit risk associated with DB, MS or BB nonperformance includes unrealized gains inherent in such contracts, which are recognized in the Statements of Financial Condition plus the value of margin or collateral held by DB, MS and BB. The amount of such credit risk was $22,297,206 and $32,592,105 at March 31, 2013 and December 31, 2012, respectively.
5. PROFIT SHARE
The following table indicates the total profit share earned and accrued during the three months ended March 31, 2013. Profit share earned (from Limited Partners’ redemptions) is credited to the New Profit Memo account as defined in the Master Fund’s Agreement of Limited Partnership. There was no profit share earned or accrued for the three months ended March 31, 2012.
Three months ended: | ||||
March 31, 2013 | ||||
Profit share earned | $ | 9,310 | ||
Profit share accrued (1) | 208,960 | |||
Total profit share | $ | 218,270 |
(1) | Included in “Other liabilities” in the Statements of Financial Condition. |
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6. FINANCIAL HIGHLIGHTS
Ratios to average capital are calculated based on 1) a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and 20% of Trading Profits (the Tracking Partner) and 2) limited partners’ capital taken as a whole. The computation of such ratios based on the amount of expenses and profit share allocation assessed to an individual partner’s capital account may vary from these ratios based on the timing of capital transactions and differences in individual partner’s management fee, selling commission, platform fee and profit share allocation arrangements. Returns are calculated based on 1) a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and 20% of Trading Profits and 2) limited partners’ capital taken as a whole. An individual partner’s returns may vary from these returns based on the timing of capital transactions and differences in individual partners’ management fee, selling commission, platform fee and profit share allocation arrangements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to Item 1, "Financial Statements.” The information contained therein is essential to, and should be read in connection with, the following analysis.
OPERATIONAL OVERVIEW
The Partnership invests substantially all of its assets in the Master Fund. Due to the nature of the Master Fund's business, its results of operations depend on the General Partner's ability to recognize and capitalize on trends and other profit opportunities in different sectors of the global capital and commodity markets. The General Partner's investment and trading methods are confidential so that substantially the only information that can be furnished regarding the Master Fund's results of operations is contained in the performance record of its trading. Unlike operating businesses, general economic or seasonal conditions do not directly affect the profit potential of the Master Fund, and its past performance is not necessarily indicative of future results. The General Partner believes, however, that there are certain market conditions, for example, markets with strong price trends, in which the Master Fund has a better likelihood of being profitable than in others.
LIQUIDITY AND CAPITAL RESOURCES
Units may be offered for sale as of the beginning, and may be redeemed as of the end, of each month.
The amount of capital raised for the Partnership should not have a significant impact on its operations, as the Partnership and the Master Fund have no significant capital expenditure or working capital requirements other than for monies to pay trading losses, brokerage commissions and charges. Within broad ranges of capitalization, the General Partner’s trading positions should increase or decrease in approximate proportion to the size of the Master Fund (in which the Partnership participates).
The Partnership raises additional capital only through the sale of Units and capital is increased through trading profits (if any). Neither the Partnership nor the Master Fund engages in borrowing.
The Master Fund trades futures and forward contracts, and may trade swap, spot and options contracts, on interest rates, commodities, currencies, metals, energy and stock indices. Risk arises from changes in the value of these contracts (market risk) and the potential inability of counterparties or brokers to perform under the terms of their contracts (credit risk). Market risk is generally to be measured by the face amount of the futures positions acquired and the volatility of the markets traded. The credit risk from counterparty non-performance associated with these instruments is the net unrealized gain, if any, on these positions plus the value of the margin or collateral held by the counterparty. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with OTC transactions because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. In most OTC transactions, on the other hand, traders must rely (typically but not universally) solely on the credit of their respective individual counterparties. Margins which may be subject to loss in the event of a default are generally required in exchange trading and counterparties may require margin or collateral in the OTC markets.
The General Partner has procedures in place to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. These procedures primarily focus on (1) real time monitoring of open positions; (2) diversifying positions among various markets; (3) limiting the assets committed as margin or collateral, generally within a range of 5% to 35% of an account’s net assets at exchange, though the amount may at any time be substantially higher; (4) prohibiting pyramiding (that is, using unrealized profits in a particular market as margin for additional positions in the same market); and (5) changing the equity utilized for trading by an account solely on a controlled periodic basis, not automatically due to an increase in equity from trading profits. The General Partner attempts to control credit risk by causing the Partnership to deal exclusively with large, well capitalized financial institutions as brokers and counterparties.
The financial instruments traded by the Master Fund contain varying degrees of off-balance sheet risk whereby changes in the market values of the futures, forward and spot contracts or the Master Fund’s satisfaction of the obligations may exceed the amount recognized in the Statements of Financial Condition of the Master Fund.
Due to the nature of the Master Fund’s business, substantially all its assets are represented by cash, cash equivalents and U.S. government obligations, while the Master Fund maintains its market exposure through open futures, forward and spot contract positions.
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The Master Fund’s futures contracts are settled by offset and are cleared by the exchange clearinghouse function. Open futures positions are marked-to-market each trading day and the Master Fund’s trading accounts are debited or credited accordingly. Options on futures contracts are settled either by offset or by exercise. If an option on a future is exercised, the Master Fund is assigned a position in the underlying future which is then settled by offset. The Master Fund’s spot and forward currency transactions conducted in the interbank market are settled by netting offsetting positions or payment obligations and by cash payments.
The value of the Master Fund’s cash and financial instruments is not materially affected by inflation. Changes in interest rates, which are often associated with inflation, could cause the value of certain of the Master Fund’s debt securities to decline, but only to a limited extent. More important, changes in interest rates could cause periods of strong up or down market price trends, during which the Master Fund’s profit potential generally increases. However, inflation can also give rise to markets which have numerous short price trends followed by rapid reversals, markets in which the Master Fund is likely to suffer losses.
The Master Fund’s assets are generally held as cash or cash equivalents, including U.S. government securities or securities issued by federal agencies, other Commodity Futures Trading Commission-authorized investments or held in bank or certain other money market instruments (e.g., bankers acceptances and Eurodollar or other time deposits), which are used to margin the Master Fund’s futures, forward and spot currency positions and withdrawn, as necessary, to pay redemptions and expenses. Other than potential market-imposed limitations on liquidity, due, for example, to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Master Fund’s futures, forward and spot trading, the Master Fund’s assets are highly liquid and are expected to remain so. During its operations through March 31, 2013, the Partnership, through its investment in the Master Fund, experienced no meaningful periods of illiquidity in any of the numerous markets traded by the General Partner.
CRITICAL ACCOUNTING ESTIMATES
The Master Fund records its transactions in futures, forward and spot contracts, including related income and expenses, on a trade date basis. Open futures contracts traded on an exchange are valued at fair value, which is based on the closing settlement price on the exchange where the futures contract is traded by the Master Fund on the day with respect to which net assets are being determined. Spot currency contracts are valued based on current market prices (“Spot Price”). Forward currency contracts are valued based on pricing models that consider the Spot Price plus the financing cost or benefit (“Forward Point”). Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Master Fund may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of months from the date the forward currency contract is being valued to its maturity date (“Months to Maturity”), then identifying the forward currency contracts for the two forward months that are closest to the Months to Maturity (“Forward Month Contracts”). Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, such as accrual of expenses, that affect the amounts and disclosures reported in the financial statements. Based on the nature of the business and operations of the Partnership, the General Partner believes that the estimates utilized in preparing the Partnership’s financial statements are appropriate and reasonable, however actual results could differ from these estimates. The estimates used do not provide a range of possible results that would require the exercise of subjective judgment. The General Partner further believes that, based on the nature of the business and operations of the Partnership, no other reasonable assumptions relating to the application of the Partnership’s critical accounting estimates other than those currently used would likely result in materially different amounts from those reported.
The General Partner has paid expenses incurred in connection with the organization of the Partnership and the initial offering of the Units. The Master Fund, on behalf of the Partnership, is reimbursing the General Partner for these costs in 60 equal monthly installments of $3,199 which began on August 1, 2009. However, to the extent that for any month the $3,199 exceeds 1/12 of 0.05% (0.05% per annum) of the Partnership’s month-end net asset value, such excess will not be reimbursed by the Partnership but will be absorbed by the General Partner. As of March 31, 2013, pursuant to this calculation $36,987 has been borne by the General Partner and will not be reimbursed by the Partnership.
RESULTS OF OPERATIONS
Due to the nature of the Partnership’s trading, through its investment in the Master Fund, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.
Period ended March 31, 2013
Total | ||||
Partners' | ||||
Capital of the | ||||
Month Ending: | Partnership | |||
March 31, 2013 | $ | 199,887,747 | ||
December 31, 2012 | 228,943,314 |
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Three Months | ||||
Change in Partners' Capital | $ | (29,055,567 | ) | |
Percent Change | (12.69 | )% |
THREE MONTHS ENDED MARCH 31, 2013
The decrease in the Partnership’s net assets of $29,055,567 was attributable to withdrawals of $41,466,222 which was partially offset by contributions of $8,479,020 and net income through its investment in the Master Fund of $3,931,635.
Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2013 decreased $105,006 relative to the corresponding period in 2012. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended March 31, 2013, relative to the corresponding period in 2012.
The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2013 increased $103,734 relative to the corresponding period in 2012. The increase was due mainly to an increase in the in higher trading volume at the Master Fund, relative to the corresponding period in 2012.
Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Selling commissions and platform fees for the three months ended March 31, 2013 increased $35,481 relative to the corresponding period in 2012. The increase was due to an increase in the average net asset value of commission paying investors of the Partnership during the three months ended March 31, 2013, relative to the corresponding period in 2012.
The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2013 decreased $26,270 relative to the corresponding period in 2012. The decrease was due mainly to a decrease in the Partnership’s net asset value during the three months ended March 31, 2013, relative to the corresponding period in 2012.
Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2013 increased $11,621 relative to the corresponding period in 2012. This increase was due primarily to an increase in the effective interest rate of U.S. Treasury Notes held by the Partnership through its investment in the Master Fund which was partially offset by a decrease in the Partnership’s net asset value during the three months ended March 31, 2013 relative to the corresponding period in 2012.
For the three months ended March 31, 2013, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized gains of $6,313,017 from trading operations (including foreign exchange transactions and translations). Management fees of $1,048,028, brokerage commissions of $263,049, selling commissions and platform fees of $874,965, administrative and operating expenses of $275,833 and custody fees and other expenses of $10,440 were paid or accrued. Interest income of $90,933 partially offset the Master Fund expenses allocated to the Partnership resulting in net income of $3,931,635.
An analysis of the Master Fund’s trading gain (loss) by sector is as follows:
% Gain | ||||
Sector | (Loss) | |||
Currencies | 0.22 | % | ||
Energies | (0.33 | )% | ||
Grains | (0.06 | )% | ||
Interest rates | (1.01 | )% | ||
Livestock | (0.23 | )% | ||
Metals | (0.55 | )% | ||
Softs | 0.32 | % | ||
Stock indices | 4.47 | % | ||
Trading gain | 2.83 | % |
MANAGEMENT DISCUSSION – 2013
Three months ended March 31, 2013
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The Partnership, through its investment in the Master Fund, produced a profit during the quarter predominantly due to gains from long stock index positions. There was also a fractional gain from trading soft commodity futures. Currency trading was nearly flat. Trading of interest rate, energy, metal, and agricultural commodity futures generated losses.
During the quarter, market participants were encouraged by an improvement in U.S. economic conditions, by signs that China’s growth was recovering after having bottomed in the third quarter of 2012, by continued monetary ease worldwide, and by evidence that some grudging progress was being made on the banking and fiscal problems that have plagued developed economies in recent years. At times, however, this enthusiasm was dampened by a variety of factors including: ongoing debate about the future direction of monetary policies and quantitative easing; discussion about the efficacy of continued austerity in the developed world; the possible impact of the U.S. sequestration; talk of political scandals in Spain; labor unrest in Greece; the unexpected Italian election results; and the Cypriot crisis.
With U.S. manufacturing, housing and employment data remaining positive, long positions in U.S. equity futures were profitable as was a short position in the VIX index. Long positions in Japanese equity futures were profitable in the wake of the Bank of Japan’s accommodative rhetoric. Long Swedish, German, Dutch, Australian, South African, Singaporean, and Taiwanese equity index trades were also positive. On the other hand, long positions in Italian, Spanish, Chinese, Korean and Hong Kong equity futures produced partially offsetting losses.
Currency trading was mixed and marginally positive for the quarter. Long U.S. and Australian dollar trades against the yen were quite profitable as Japan’s leaders forged ahead with promises of monetary accommodation. A long Australian position relative to British Pound Sterling and long U.S. dollar and Euro trades against the South African rand also posted gains. Finally, short Euro trades versus the currencies of Romania, Sweden and Turkey and short U.S. dollar trades versus the currencies of Chile, Mexico and Israel were profitable. On the other hand, short U.S. dollar trades versus the currencies of the United Kingdom, Canada, Colombia, Korea, Singapore, Norway, Poland, Switzerland and the Euro registered losses and were reduced as were short Euro trades against Norway, Poland, Hungary and the Czech Republic.
In January when growth prospects brightened and risk aversion dissipated, interest rates rose and long positions in German, U.S., Australian, Canadian, British and French note and bond futures—which had been highly profitable for the last two years—produced losses and were reduced. In late February and March, increasing worry increased the purchase of government securities and the long—though reduced—positions produced profits that fell short of earlier losses. For the quarter, a long JGB trade was profitable. On the other hand, trading of German, British, Canadian, Australian and U.S. interest rate futures was unprofitable.
Trading of commodities was fractionally unprofitable. Among soft commodities, short positions in coffee, sugar, and crude palm oil were profitable due to the weight of abundant supplies on price. Also, a long cotton trade produced a gain. Meanwhile, short cocoa and robusta coffee trades posted losses. In grains, the losses from trading corn and the soybean complex outdistanced the gain from a short wheat position. Long cattle and hog positions generated losses and were reversed. Energy prices were volatile during the quarter and the losses from trading crude oil, heating oil and London gas oil were greater than the profits from a long RBOB gasoline position. In metals, the profit from a short aluminum position fell short of the losses from long gold, silver, platinum, zinc, lead and nickel trades.
30 |
Period ended March 31, 2012
Total | ||||
Partners' | ||||
Month Ending: | Capital of the Partnership | |||
March 31, 2012 | $ | 228,311,782 | ||
December 31, 2011 | 236,019,823 |
Three Months | ||||
Change in Partners' Capital | $ | (7,708,041 | ) | |
Percent Change | (3.27 | )% |
Three months ended March 31, 2012
The decrease in the Partnership’s net assets of $7,708,041 was attributable to withdrawals of $5,226,475 and, through its investment in the Master Fund, net loss after profit share of $19,095,044 which was partially offset by subscriptions of $16,613,478.
For the three months ended March 31, 2012, the Partnership, through its investment in the Master Fund, had net realized and unrealized losses of $16,707,868 from trading operations (including foreign exchange transactions and translations). Management fees of $1,153,034, brokerage commissions of $159,315, selling commissions and platform fees of $839,484, administrative and operating expenses of $302,103 and custody fees and other expenses of $12,552 were paid or accrued. Interest income of $79,312 partially offset the Master Fund expenses allocated to the Partnership resulting in net loss of $19,095,044.
An analysis of the Master Fund’s trading gain (loss) by sector is as follows:
% Gain | ||||
Sector | (Loss) | |||
Currencies | (3.08 | )% | ||
Energies | 1.01 | % | ||
Grains | (0.61 | )% | ||
Interest rates | (2.21 | )% | ||
Livestock | (0.12 | )% | ||
Metals | (1.25 | )% | ||
Softs | 0.01 | % | ||
Stock indices | (0.53 | )% | ||
Trading loss | (6.78 | )% |
MANAGEMENT DISCUSSION – 2012
The Partnership registered a loss during the quarter as losses from trading currency forwards, interest rates, equities, metals and grains futures overwhelmed gains from trading energies and soft commodities futures. The sentiment of market participants during the quarter was dominated by the belief that both the economic outlook and the European debt crisis were improving.
Foreign exchange trading was particularly volatile and unprofitable. Entering the quarter, the U.S. dollar had been trading higher against most currencies based on relative economic strength, financial tumult in Europe and perceived weakening of growth in China, but as these factors receded, U.S. interest rates appeared to be staying negligible for an extended period. The U.S. dollar sold off against Central and South American, European and Asian currencies generating losses on long U.S. dollar positions and in many cases bringing a reversal to short U.S. dollar positions. Later, short U.S. dollar trades versus the Australian dollar, Brazilian real, Columbian peso and Chilean peso also generated losses. For the Brazilian real, in particular, a larger than expected cut in the Brazilian Central Bank’s Selic benchmark interest rate and increased capital controls geared toward weakening the currency undermined the real. Also, a long Japanese yen trade versus the U.S. dollar lost money and was reversed to a short trade after the yen weakened suddenly following a surprise expansionary move by the Bank of Japan which increased its asset purchase program by $130 billion and set an inflation target for the first time.
Turning to non-U.S. dollar cross rates, long Australian dollar positions against a variety of currencies generated losses when the Aussie weakened as slowing growth, rising unemployment and declining inflation statistics combined with forecasts of a Chinese growth slowdown to increase the likelihood that the Reserve Bank of Australia might ease monetary policy. Short Euro trades against several currencies were unprofitable as the Euro rebounded when the European Central Bank’s Long Term Refinancing Operations program improved the functioning of financial markets in Europe and as the size of the European rescue fund was substantially raised.
Whether from a reduced need for safety because of an improving economic outlook, particularly in the U.S., from an increased worry about inflation, from a renewed concern about government debt levels or from a reduced likelihood of quantitative easing from the U.S. Federal Reserve, interest rates rose and long positions in U.S., Australian, Canadian, British and Japanese note and bond futures produced losses.
A first quarter rally in equity markets was rather widespread as market participants responded favorably to an apparent improvement in the global economic outlook, particularly in the U.S. and to progress by the European Union toward resolving their sovereign debt crisis. Long positions in U.S. equity futures were profitable, as was a short CBOE VIX trade that also benefitted from rising equity markets. However, short positions in numerous European and Asian equity indices, especially China, Hong Kong, Japan and Germany, produced even bigger losses.
31 |
Industrial metals had been in a sustained downtrend but as pessimism about global growth swung to modest optimism – perhaps prematurely – the metals rallied strongly and generated losses on short positions. A short platinum position also was unprofitable as a supply interruption from South Africa boosted prices. Finally, a short silver trade was unprofitable.
In the energy markets, long positions in Brent crude, RBOB gasoline, and London gas oil benefited from the general commodity rally and continued stresses from the Middle East and were profitable. The biggest winners in the sector were short positions in U.S. natural gas where the supply boom from fracking and horizontal drilling in shale formations continued to drive prices down.
Trading of soft agricultural commodities was fractionally negative. Short grain trades, especially in the soybean complex, were unprofitable as was non-trend trading of grains. A short cocoa position was unprofitable as hot, dry weather hit the Ivory Coast and raised fears that an expected bumper crop might face significant damage. Short cotton and rubber trades were also unprofitable when prices rose as pessimism about worldwide growth lifted, at least temporarily. A short Arabica coffee trade produced a profit as expectations of a bumper Brazilian harvest pushed Arabica to its lowest price in 18 months in late March. A long crude palm oil trade was profitable.
OFF-BALANCE SHEET ARRANGEMENTS
Neither the Partnership nor the Master Fund engages in off-balance sheet arrangements with other entities.
CONTRACTUAL OBLIGATIONS
Neither the Partnership nor the Master Fund enters into any contractual obligations or commercial commitments to make future payments of a type that would be typical for an operating company or that would affect its liquidity or capital resources. The Partnership’s sole business, through its investment in the Master Fund, is trading futures, forward currency, spot and swap contracts, both long (contracts to buy) and short (contacts to sell). The Partnership, through its investment in the Master Fund, may also engage in trading swaps. All such contracts are settled by offset, not delivery. Substantially all such contracts are for settlement within four months of the trade date and substantially all such contracts are held by the Master Fund for less than four months before being offset or rolled over into new contracts with similar maturities. The financial statements of the Master Fund present a condensed schedule of investments setting forth open futures, forward and other contracts at March 31, 2013 and December 31, 2012.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 4. CONTROLS AND PROCEDURES
The General Partner, with the participation of the principal executive officers and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the period covered by this quarterly report, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective. There were no changes in the General Partner's internal controls over financial reporting during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, the General Partner's internal controls over financial reporting with respect to the Partnership.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 1A. Risk Factors
Not required.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Pursuant to the Partnership’s Third Amended and Restated Limited Partnership Agreement, investors may redeem their Units at the end of each calendar month at the then current month-end net asset value. The redemption of Units has no impact on the value of Units that remain outstanding, and Units are not reissued once redeemed.
The following table summarizes the redemptions by Series A, Series B and Series C limited partners during the three months ended March 31, 2013.
Series A | Series B | Series C | ||||||||||||||||||||||
Date of Withdrawal | Units Redeemed | NAV per Unit | Units Redeemed | NAV per Unit | Units Redeemed | NAV per Unit | ||||||||||||||||||
January 31, 2013 | (2,704.0813 | ) | $ | 949.62 | (1,828.9890 | ) | $ | 1,002.81 | (30,051.6921 | ) | $ | 1,011.71 | ||||||||||||
February 28, 2013 | (2,884.8325 | ) | 934.22 | (865.4250 | ) | 987.99 | (704.0148 | ) | 996.97 | |||||||||||||||
March 31, 2013 | (2,093.4268 | ) | 945.78 | (184.9450 | ) | 1,001.67 | (240.2119 | ) | 1,010.98 | |||||||||||||||
Total | (7,682.3406 | ) | (2,879.3590 | ) | (30,995.9188 | ) |
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are included herewith:
31.01 Rule 13(a)-14(a)/15(d)-14(a) Certification of Co-Chief Executive Officer
31.02 Rule 13(a)-14(a)/15(d)-14(a) Certification of Co-Chief Executive Officer
31.03 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer
32.01 Section 1350 Certification of Co-Chief Executive Officer
32.02 Section 1350 Certification of Co-Chief Executive Officer
32.03 Section 1350 Certification of Chief Financial Officer
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Taxonomy Extension Schema Document |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* | XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document. |
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.
By: | Millburn Ridgefield Corporation, | |
General Partner |
Date: May 14, 2013 | |
/s/ Tod A. Tanis | |
Tod A. Tanis | |
Vice-President | |
(Principal Accounting Officer) |
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