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, 2014

 

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _____

 
 

Commission file number:  000-52599

---

AIS FUTURES FUND IV L.P.

(Exact name of registrant as specified in its charter)

---

 

Delaware		13-3909977
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

 

c/o AIS CAPITAL MANAGEMENT, L.P.

187 Danbury Road, Suite 201

Wilton, Connecticut 06897

(Address of principal executive offices) (zip code)

 

(203) 563-1180

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:  None

 

Securities registered pursuant to Section 12(g) of the Act:  Limited Partnership Interests

 

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, or a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ¨

Accelerated filer  ¨

Non-accelerated filer  ¨

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

 

 

TABLE OF CONTENTS

 

 

	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements	2
Statements of Financial Condition	2
Condensed Schedules of Investments	3-4
Statements of Operations	5
Statements of Changes in Partners’ Capital (Net Asset Value)	6
Notes to Financial Statements	7-16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17-18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	19
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	19
Item 1A. Risk Factors	19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3. Defaults Upon Senior Securities	19
Item 4. Mine Safety Disclosures	19
Item 5. Other Information	20
Item 6. Exhibits	20
Signature	21
Rule 13a–14(a)/15d–14(a) Certification	S-1
Section 1350 Certification	S-2

 

 

PART I – FINANCIAL INFORMATION

 

Item 1: Financial Statements

  

AIS FUTURES FUND IV L.P.

STATEMENTS OF FINANCIAL CONDITION

March 31, 2014 (Unaudited) and December 31, 2013 (Audited)

_______________

 

		March 31,				December 31,
		2014				2013
ASSETS
Equity in futures broker trading accounts
Cash		$	6,114,670			$	3,840,242
United States government securities			6,999,025				8,499,181
Unrealized gain on open futures contracts, net			2,642,959				0
Unrealized (loss) on open futures contracts, net			(891,185	)			(591,732	)
Interest receivable			543				236
Deposits with futures brokers			14,866,012				11,747,927
Cash			89,093				86,602
United States government securities			27,497,208				31,994,040
Total assets		$	42,452,313			$	43,828,569
LIABILITIES
Accounts payable		$	97,446			$	87,728
Commissions and other trading fees on open contracts payable			10,644				7,974
Management fee payable			70,267				72,608
Selling agent administrative and service fee payable			1,462				0
Subscriptions received in advance			96,196				100,423
Redemptions payable			1,095,596				3,818,060
Total liabilities			1,371,611				4,086,793
PARTNERS’ CAPITAL (Net Asset Value)
Limited Partners - Series A			40,654,509				39,218,336
Limited Partners - Series B			273,362				249,046
Limited Partners - Series C			152,831				274,394
Total partners’ capital (Net Asset Value)			41,080,702				39,741,776
		$	42,452,313			$	43,828,569

  

See accompanying notes.

 

 

AIS FUTURES FUND IV L.P.

CONDENSED SCHEDULE OF INVESTMENTS

March 31, 2014 (Unaudited)

_______________

 

UNITED STATES GOVERNMENT SECURITIES*

 

Face Value				Maturity Date		Description		Fair Value				% of Net Asset Value
$	1,500,000			04/03/14		U.S. Treasury Bills		$	1,499,997				3.65	%
	7,500,000			04/10/14		U.S. Treasury Bills			7,499,825				18.26	%
	1,500,000			05/15/14		U.S. Treasury Bills			1,499,840				3.65	%
	12,500,000			06/19/14		U.S. Treasury Bills			12,498,162				30.42	%
	9,500,000			07/10/14		U.S. Treasury Bills			9,498,963				23.12	%
	2,000,000			09/04/14		U.S. Treasury Bills			1,999,446				4.87	%
						Total United States government securities
						(cost - $34,489,419)		$	34,496,233				83.97	%

 

LONG FUTURES CONTRACTS**

 

Description		Fair Value				% of Net Asset Value
Agricultural		$	2,642,959				6.43	%
Currencies			551,875				1.34	%
Energy			597,860				1.46	%
Metals			(1,640,788	)			(3.99	)%
Total long futures contracts		$	2,151,906				5.24	%

 

SHORT FUTURES CONTRACTS**

 

No. of Contracts				Description
	52			Interest Rates (U.S. Treasury Bond, expires 6/2014)		$	(60,125	)			(0.15	)%
				Stock Index			(340,007	)			(0.83	)%
				Total short futures contracts		$	(400,132	)			(0.98	)%
				Total futures contracts		$	1,751,774				4.26	%

 

*

Includes $7,000,000 face value with a fair value of $6,999,025 pledged as collateral for the trading of futures and options on futures contracts.

**

No individual futures contract position constituted greater than 5 percent of Net Asset Value. Accordingly, except for the short interest rate futures contracts, the number of contracts and expiration dates are not presented.

 

See accompanying notes.

 

 

AIS FUTURES FUND IV L.P.

CONDENSED SCHEDULE OF INVESTMENTS

December 31, 2013 (Audited)

_______________

 

UNITED STATES GOVERNMENT SECURITIES*

 

Face Value				Maturity Date		Description		Fair Value				% of Net Asset Value
$	9,500,000			01/09/14		U.S. Treasury Bills		$	9,499,888				23.91	%
	4,500,000			02/06/14		U.S. Treasury Bills			4,499,841				11.32	%
	2,500,000			02/27/14		U.S. Treasury Bills			2,499,819				6.29	%
	1,000,000			03/06/14		U.S. Treasury Bills			999,913				2.52	%
	1,500,000			04/03/14		U.S. Treasury Bills			1,499,899				3.77	%
	7,500,000			04/10/14		U.S. Treasury Bills			7,498,246				18.87	%
	1,500,000			05/15/14		U.S. Treasury Bills			1,499,521				3.77	%
	12,500,000			06/19/14		U.S. Treasury Bills			12,496,094				31.44	%
						Total United States government securities
						(cost - $40,488,057)		$	40,493,221				101.89	%

 

LONG FUTURES CONTRACTS**

 

Description		Fair Value				% of Net Asset Value
Agricultural		$	(56,090	)			(0.14	)%
Currencies			(331,125	)			(0.83	)%
Energy			(99,519	)			(0.25	)%
Metals			(595,609	)			(1.50	)%
Total long futures contracts		$	(1,082,343	)			(2.72	)%

 

SHORT FUTURES CONTRACTS**

 

No. of Contracts				Description
	208			Interest Rates (U.S. Treasury Bond, expires 3/2014)		$	490,611				1.23	%
				Total futures contracts		$	(591,732	)			(1.49	)%

 

* Includes $8,500,000 face value with a fair value of $8,499,181 pledged as collateral for the trading of futures and options on futures contracts.

** No individual futures contract position constituted greater than 5 percent of Net Asset Value. Accordingly, except for the short interest rate futures contracts, the number of contracts and expiration dates are not presented.

 

See accompanying notes.

 

 

AIS FUTURES FUND IV L.P.

STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2014 and 2013 (Unaudited)

_______________

 

		Three Months Ended
		March 31,
		2014				2013
TRADING GAINS (LOSSES)
Realized		$	1,498,564			$	(5,401,143	)
Change in unrealized			2,343,506				2,336,014
Brokerage commissions			(25,370	)			(21,838	)
Total gain (loss) from trading			3,816,700				(3,086,967	)
NET INVESTMENT (LOSS)
Income
Interest income			5,767				16,705
Expenses
Selling agent administrative and service fee			237,859				408,044
Management fee			203,513				327,869
Operating expenses			50,124				49,375
Total expenses			491,496				785,288
Net investment (loss)			(485,729	)			(768,583	)
NET INCOME (LOSS)			3,330,971				(3,855,550	)
Less: General Partner Profit Share allocation			1,462				1,192
Net income (loss) for pro rata allocation to all partners		$	3,329,509			$	(3,856,742	)

 

See accompanying notes.

 

 

AIS FUTURES FUND IV L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE)

For the Three Months Ended March 31, 2014 and 2013 (Unaudited)

_______________

 

		Partners’ Capital
		Series B -				Series A -				Series B -				Series C -
		General				Limited				Limited				Limited
		Partner				Partners				Partners				Partners				Total
Balances at December 31, 2013		$	0			$	39,218,336			$	249,046			$	274,394			$	39,741,776
Net income for the three months ended March 31, 2014: General Partner Profit Share allocation			0				0				0				0				0
Pro rata allocation to all partners			0				3,280,430				24,316				24,763				3,329,509
Subscriptions			0				50,000				0				0				50,000
Redemptions			0				(1,894,257	)			0				(146,326	)			(2,040,583	)
Balances at March 31, 2014		$	0			$	40,654,509			$	273,362			$	152,831			$	41,080,702
Balances at December 31, 2012		$	410,873			$	69,117,753			$	0			$	0			$	69,528,626
Transfers			0				(62,591	)			0				62,591				0
Net income (loss) for the three months ended March 31, 2013: General Partner Profit Share allocation			1,192				0				0				0				1,192
Pro rata allocation to all partners			(19,240	)			(3,834,241	)			0				(3,261	)			(3,856,742	)
Subscriptions			0				30,000				0				0				30,000
Redemptions			(1,192	)			(1,770,744	)			0				0				(1,771,936	)
Balances at March 31, 2013		$	391,633			$	63,480,177			$	0			$	59,330			$	63,931,140

 

See accompanying notes.

 

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS

_______________

 

Note 1.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

	A.	General Description of the Partnership

AIS Futures Fund IV L.P. (the Partnership) is a Delaware limited partnership, which operates as a commodity investment pool. The Partnership engages in the speculative trading of futures contracts and options on futures contracts. The Partnership is an Investment Company that follows the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (the Codification) Topic 946 – Financial Services – Investment Companies. The Partnership is subject to the regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of commodity exchanges and Futures Commission Merchants (brokers) through which the Partnership trades. The Partnership is also subject to the applicable reporting requirements of the Securities Exchange Act of 1934.

 

The Fourth Amended and Restated Limited Partnership Agreement (the Limited Partnership Agreement) provides, among other things, that the Partnership shall dissolve no later than December 31, 2026.

 

B.

Method of Reporting and Use of Estimates

 

The Partnership’s financial statements are presented in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The FASB Codification is the single source of U.S. GAAP.

 

Pursuant to the Cash Flows Topic of the Codification, the Partnership qualifies for an exemption from the requirement to provide a statement of cash flows and has elected not to provide a statement of cash flows.

 

C.

Futures Contracts and Options on Futures Contracts

 

Futures contracts and options on futures contracts transactions are recorded on the trade date and open contracts are reflected at fair value, based on the primary exchange’s closing price. Gains or losses are realized when contracts are liquidated. As each broker has the individual right of offset, the Partnership presents the aggregate net unrealized gains with such brokers as net unrealized gain and the aggregate net unrealized (losses) with such brokers as net unrealized (loss) (i.e., net unrealized gains from one broker are not off-set against net unrealized (losses) from another broker) in the statements of financial condition. The unrealized gains or losses on open futures contracts is the difference between contract trade price and quoted market price. Any change in net unrealized gain or loss from the preceding period is reported in the statements of operations. Brokerage commissions on futures contracts and options on futures contracts include other trading fees and are charged to expense when contracts are opened.

 

D.

United States Government Securities

 

United States government securities are stated at cost plus accrued interest, which approximates fair value based on quoted market prices. Any change in value of these securities is reported as interest income in the statements of operations.

 

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

Note 1.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

E.

Income Taxes

 

The Partnership prepares and files calendar year U.S. and applicable state information tax returns and reports to the partners their allocable shares of the Partnership’s income, expenses and trading gains or losses. No provision for income taxes has been made in these financial statements as each partner is individually responsible for reporting income or loss based on its respective share of the Partnership’s income and expenses as reported for income tax purposes. The 2010 through 2013 tax years generally remain subject to examination by U.S. federal and most state tax authorities.

 

The Partnership applies the provisions of Codification Topic 740, Income Taxes, which prescribe the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being measured and recognized in the financial statements. This accounting standard requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s financial statements to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions with respect to tax at the Partnership level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax expense in the current year. The Partnership has elected an accounting policy to classify interest and penalties, if any, as interest expense. The General Partner has concluded there is no tax expense or interest expense related to uncertainties in income tax positions for the three months ended March 31, 2014 and 2013.

 

F.

Foreign Currency Transactions

 

The Partnership’s functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statements of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income currently.

 

G.

Capital Accounts

 

The Partnership offers three Series of Interests. The Series A Interests are available to all qualified investors, subject to applicable conditions and restrictions. Series A Interests pay a management fee and Selling Agent Administrative and Service Fee (“Service Fee”) and are subject to the General Partner Profit Share allocation. The Series B Interests are available for sale to the General Partner and its principals. Series B Interests are not charged a management fee and Service Fee and are not subject to the General Partner Profit Share allocation. The Series C Interests are available to eligible investors that are not solicited by Selling Agents, subject to applicable conditions and restrictions. The Series C Interests have the same rights and obligations as Series A Interests, except Series C Interests are not subject to the Service Fee and are charged a monthly Management Fee as described in Note 2.

 

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

Note 1.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

G.

Capital Accounts (continued)

 

The Partnership accounts for subscriptions, allocations and redemptions on a per partner capital account basis. Income or loss, prior to the Management Fee, Service Fee and General Partner Profit Share allocation, is allocated pro rata to the capital accounts of all partners. Each Limited Partner is then charged their applicable Management Fee and Service Fee. The General Partner Profit Share allocation applicable to each Limited Partner is then allocated to the General Partner’s capital account from the Limited Partner’s capital account at the end of each calendar year or upon redemption by a Limited Partner.

 

The Partnership accrues as a liability the General Partner Profit Share allocation for interim periods during which the General Partner Profit Share allocation is not yet allocable to the General Partner’s capital account in accordance with the terms of the Limited Partnership Agreement. Such accrual is subject to partial or complete reversal until a condition for allocation to the General Partner’s capital account is met, at which time the applicable amount of the accrual is reversed and allocated to the General Partner’s capital account.

 

H.

Redemptions

 

Limited Partners may require the Partnership to redeem some or all of their capital upon ten days prior written notice. The ten days prior written notice may be waived at the discretion of the General Partner. Partner redemptions are recorded on their effective date, which is generally the last day of the month.

 

I.

Recently Issued Accounting Pronouncement

 

In June 2013, the FASB issued Accounting Standards Update No. 2013-08 (ASU 2013-08), entitled Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement, and Disclosure Requirements. ASU 2013-08 changes the approach to assessing whether an entity is an investment company, clarifies the characteristics of an investment company and provides comprehensive guidance for assessing whether an entity is an investment company. In addition, ASU 2013-08 requires non-controlling ownership interests in other investment companies to be measured at fair value and requires additional disclosures about the investment company’s status as an investment company. ASU 2013-08 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2013.

 

The Partnership’s adoption of ASU 2013-08 had no material impact on the Partnership’s financial statements.

 

J.

Interim Financial Statements

 

The financial statements included herein were prepared by us without audit according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP may be omitted pursuant to such rules and regulations. The financial statements reflect, in the opinion of management, all adjustments necessary that were of a normal and recurring nature and adequate disclosures to present fairly the financial position and results of operations as of and for the periods indicated. The results of operations for the three months ended March 31, 2014 and 2013 are not necessarily indicative of the results to be expected for the full year or for any other period.

 

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

Note 1.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

J.

Interim Financial Statements (continued)

 

These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Form 10-K previously filed with the Securities and Exchange Commission.

 

Note 2.

GENERAL PARTNER

 

Effective September 25, 2013, AIS Capital Management, L.P. became the General Partner and commodity trading advisor of the Partnership, which conducts and manages the business and trading activities of the Partnership. AIS Futures Management LLC, the former General Partner, merged with and into AIS Capital Management, L.P.

 

On August 31, 2013, AIS Futures Management LLC withdrew its entire interest in the Partnership. In lieu of distributing cash proceeds, capital subscriptions were made, effective August 31, 2013, to the accounts of certain Series B limited partners who are principals of the General Partner. This full withdrawal by AIS Futures Management LLC did not affect its role as the General Partner of the Partnership, as set forth in the Limited Partnership Agreement.

 

The Limited Partnership Agreement provides for the General Partner to receive a monthly Management Fee equal to 1/12 of 2% (2% annually) of each Series A Limited Partner’s month-end Net Assets, as defined and 1/12 of 2.7% (2.7% annually) of each Series C Limited Partner’s month-end Net Assets, as defined. The General Partner also receives a Profit Share allocation equal to 20% of any New Trading Profit, as defined, attributable to each Series A and C Limited Partner’s Interest achieved as of each calendar year-end or upon redemption. For the three months ended March 31, 2014, the Management Fees charged to Series A and Series C Limited Partners were $201,581 and $1,932, respectively. For the three months ended March 31, 2013, the Management Fees charged to Series A and Series C Limited Partners were $327,452 and $417, respectively.

 

During the three months ended March 31, 2013, certain Series A Limited Partners were charged Management Fees at a rate lower than described above, to offset the effect of the additional 1.5% per annum and Service Fee described in Note 3. Accordingly, for the three months ended March 31, 2013, Management Fees were reduced by approximately $10,070. For the three months ended March 31, 2014, there were no Series A Limited Partners that were charged the additional 1.5% per annum Service Fee. Accordingly, there was no reduction in Management Fees that occurred during the three months ended March 31, 2014.

 

Note 3.

SELLING AGENT ADMINISTRATIVE AND SERVICE FEES

 

Certain Series A Limited Partners that were solicited by Selling Agents are charged a Service Fee equal to 1/12 of 2.5% (2.5% annually) of each Series A Limited Partner’s month-end Net Assets, as defined, sold by them which remain outstanding as of each month-end. The Selling Agents may pass on a portion of the Service Fee to its investment executives. The Service Fee is accrued and expensed as incurred.

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

Note 3.

SELLING AGENT ADMINISTRATIVE AND SERVICE FEES (CONTINUED)

 

In the event the Service Fee is no longer payable to a Selling Agent, the relevant Series A Limited Partner who was solicited by such Selling Agent will no longer be charged the Service Fee and such Series A Interests may be transferred to Series C Interests. During the three months ended March 31, 2013, there was a transfer of $62,591 to Series C Interests from Series A Interests related to a Series A Limited Partners that were no longer subject to a Service Fee. For the three months ended March 31, 2014 and 2013, certain Series A Limited Partners were not subject to the Service Fee.

 

For investment executives associated with the sale of Series A Limited Partnership Interests in excess of $500,000, the investment executive’s firm will receive an additional 1.5% per annum Service Fee with respect to such Series A Limited Partnership Interests in excess of $500,000, for the first twelve months following the sale of such Series A Limited Partnership Interests. The additional Service Fee is paid by the Partnership, however, the General Partner reduces its Management Fee (see Note 2.) related to the Series A Limited Partner’s Interest. Accordingly, this additional Service Fee does not affect the total fees charged to the Series A Limited Partner.

 

Note 4.

SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS

 

Investments in the Partnership are made by subscription agreement, subject to acceptance by the General Partner. A selling commission of up to 2% of the subscription amount may be deducted from the subscription proceeds and paid to the applicable Selling Agent, if any. For the three months ended March 31, 2014 and 2013, there were no selling commissions charged to Series A Limited Partners, respectively. Series A Limited Partner subscriptions, as presented in the statements of changes in partners’ capital (net asset value), are net of such selling commissions, if any.

 

The Partnership is not required to make distributions, but may do so at the sole discretion of the General Partner. A Limited Partner may request and receive partial or full redemption of their capital account as of the close of business on the last business day of any month, subject to restrictions in the Limited Partnership Agreement.

 

Note 5.

DEPOSITS WITH FUTURES BROKERS

 

The Partnership deposits funds with Newedge USA, LLC and ADM Investor Services, Inc. subject to Commodity Futures Trading Commission regulations and various exchange and futures broker requirements. Margin requirements are satisfied by the deposit of U.S. government securities and cash with such futures brokers. Accordingly, assets used to meet margin and other futures broker or regulatory requirements are partially restricted. The Partnership earns interest income on its assets deposited with the futures brokers.

 

Note 6.

DEPOSITS WITH SECURITIES BROKER

 

The Partnership deposits cash and U.S. government securities with Wells Fargo Advisors, LLC, subject to Securities and Exchange Commission regulations and securities broker requirements. Margin requirements are satisfied by the deposit of cash and securities with such securities broker. Accordingly, assets used to meet margin and other securities broker or regulatory requirements are partially restricted. The Partnership earns interest income on its assets deposited with the securities broker. The fair value of the Partnership’s U.S. Treasury Bills held at the securities broker totaled $27,497,208 and $31,994,040 at March 31, 2014 and December 31, 2013, respectively.

 

Note 7.

FAIR VALUE

 

Fair value, as defined in the Fair Value Measurement Topic of the Codification, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy, as set forth in the Fair Value Measurement Topic of the Codification, prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: quoted market prices in active markets for identical assets or liabilities (Level 1); inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly (Level 2); and unobservable inputs for an asset or liability (Level 3). If the inputs used to measure a financial instrument fall within different levels of the fair value hierarchy, the categorization is based on the lowest level input that is significant to the measurement of that financial instrument. The Partnership recognizes transfers between fair value hierarchy levels, if any, at the beginning of the reporting period. There were no transfers between levels during the three months ended March 31, 2014 and during the year ended December 31, 2013.

 

For U.S. government securities, which are categorized as Level 2 fair value measurements at March 31, 2014 and December 31, 2013, fair value is determined as cost plus accrued interest, which represents an income approach to fair value measurement.

 

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

Note 7.

FAIR VALUE (CONTINUED)

 

The following tables summarize the Partnership’s assets and liabilities accounted for at fair value at March 31, 2014 and December 31, 2013 using the fair value hierarchy. Fair value is presented on a gross basis even though certain assets and liabilities qualify for net presentation in the statements of financial condition.

 

		March 31, 2014
Description		Level 1				Level 2				Level 3				Total
Assets
Futures contracts
Agricultural		$	2,642,959			$	0			$	0			$	2,642,959
Currencies			551,875				0				0				551,875
Energy			602,159				0				0				602,159
Metals			4,375				0				0				4,375
Stock indices			1,680				0				0				1,680
Total futures contracts			3,803,048				0				0				3,803,048
U.S. Treasury bills			0				34,496,233				0				34,496,233
Total assets		$	3,803,048			$	34,496,233			$	0			$	38,299,281
Liabilities
Futures contracts
Energy		$	(4,299	)		$	0			$	0			$	(4,299	)
Interest rate			(60,125	)			0				0				(60,125	)
Metal			(1,645,163	)			0				0				(1,645,163	)
Stock indices			(341,687	)			0				0				(341,687	)
Total liabilities		$	(2,051,274	)		$	0			$	0			$	(2,051,274	)

 

		December 31, 2013
Description		Level 1				Level 2				Level 3				Total
Assets
Futures contracts
Agricultural		$	150,603			$	0			$	0			$	150,603
Energy			63,435				0				0				63,435
Interest rate			490,611				0				0				490,611
Metals			212,254				0				0				212,254
Total futures contracts			916,903				0				0				916,903
U.S. Treasury bills			0				40,493,221				0				40,493,221
Total assets		$	916,903			$	40,493,221			$	0			$	41,410,124
Liabilities
Futures contracts
Agricultural		$	(206,693	)		$	0			$	0			$	(206,693	)
Currencies			(331,125	)			0				0				(331,125	)
Energy			(162,954	)			0				0				(162,954	)
Metals			(807,863	)			0				0				(807,863	)
Total liabilities		$	(1,508,635	)		$	0			$	0			$	(1,508,635	)

 

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

Note 8.

DERIVATIVES

 

The Partnership engages in the speculative trading of futures contracts and options on futures contracts (collectively, derivatives) for the purpose of achieving capital appreciation. None of the Partnership’s derivative instruments are designated as hedging instruments, as defined in the Derivatives and Hedging Topic of the Codification, nor are they used for other risk management purposes. The General Partner actively assesses, manages and monitors risk exposure on derivatives on a contract basis, a sector basis (e.g., agricultural, currencies, metals, etc.), and on an overall basis in accordance with established risk parameters. Due to the speculative nature of the Partnership’s derivative trading activity, the Partnership is subject to the risk of substantial losses from derivatives trading.

 

The Partnership’s derivatives held at March 31, 2014 and December 31, 2013 are subject to agreements similar to master netting agreements with the Partnership’s futures brokers which grant the futures brokers the right to set off recognized assets and liabilities if certain conditions exist. The following tables present gross amounts of assets and liabilities which are offset in the statements of financial condition.

 

		Offsetting of Derivative Assets and Liabilities
		at March 31, 2014
						Gross Amounts				Net Amounts
						Offset in the				Presented in the
		Gross Amounts				Statement of				Statement of
		of Recognized				Financial				Financial
		Assets				Condition				Condition
Assets
Futures Contracts(1)
Newedge USA, LLC		$	1,160,089			$	(1,160,089	)		$	0
ADM Investor Services, Inc.			2,642,959				0				2,642,959
Total assets		$	3,803,048			$	(1,160,089	)		$	2,642,959

 

						Gross Amounts				Net Amounts
						Offset in the				Presented in the
		Gross Amounts				Statement of				Statement of
		of Recognized				Financial				Financial
		Liabilities				Condition				Condition
Liabilities
Futures Contracts(1)
Newedge USA, LLC		$	(2,051,274	)		$	1,160,089			$	(891,185	)
ADM Investor Services, Inc.			0				0				0
Total liabilities		$	(2,051,274	)		$	1,160,089			$	(891,185	)

 

(1)

See Note 7. for the fair value of each type of contract within this category

 

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

Note 8.

DERIVATIVES (CONTINUED)

 

		Offsetting of Derivative Assets and Liabilities
		at December 31, 2013
						Gross Amounts				Net Amounts
						Offset in the				Presented in the
		Gross Amounts				Statement of				Statement of
		of Recognized				Financial				Financial
		Assets				Condition				Condition
Assets
Futures Contracts(1)
Newedge USA, LLC		$	766,300			$	(766,300	)		$	0
ADM Investor Services, Inc.			150,603				(150,603	)			0
Total assets		$	916,903			$	(916,903	)		$	0

 

						Gross Amounts				Net Amounts
						Offset in the				Presented in the
		Gross Amounts				Statement of				Statement of
		of Recognized				Financial				Financial
		Liabilities				Condition				Condition
Liabilities
Futures Contracts(1)
Newedge USA, LLC		$	(1,301,942	)		$	766,300			$	(535,642	)
ADM Investor Services, Inc.			(206,693	)			150,603				(56,090	)
Total liabilities		$	(1,508,635	)		$	916,903			$	(591,732	)

 

Within the statements of financial condition, the fair value of futures contracts is included in net unrealized gain (loss) on open futures contracts. The cash and other property (for example, U.S. Treasury bills) held by each counterparty at March 31, 2014 and December 31, 2013 exceeds the net derivatives liability at such counterparty.

 

The following presents the Partnership’s derivative trading results and information related to the volume of the Partnership’s derivative activity for the three months ended March 31, 2014 and 2013. The below captions of “Realized” and “Change in Unrealized” correspond to the captions in the statements of operations.

 

		Three Months Ended March 31, 2014												Three Months Ended March 31, 2013
		Trading Gains (Losses)												Trading Gains (Losses)
						Change in				Number of								Change in				Number of
Futures Contracts		Realized				Unrealized				Contracts Closed				Realized				Unrealized				Contracts Closed
Agricultural		$	809,756			$	2,699,049				702			$	(3,488,309	)		$	1,169,734				1,254
Currencies			(746,666	)			883,000				313				1,461,344				(412,345	)			436
Energy			552,982				697,379				1,142				462,201				483,979				1,446
Interest rates			(440,263	)			(550,736	)			208				0				0				0
Metals			1,844,409				(1,045,179	)			372				(3,835,454	)			1,139,746				505
Stock index			(521,654	)			(340,007	)			544				(925	)			(45,100	)			2
Total futures contracts		$	1,498,564			$	2,343,506							$	(5,401,143	)		$	2,336,014

 

The number of contracts closed represents the number of contracts closed during the three months ended March 31, 2014 and 2013 in the applicable category.

 

(1)

See Note 7. for the fair value of each type of contract within this category

 

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

Note 9.

MARKET AND CREDIT RISKS

 

The Partnership engages in the speculative trading of futures contracts and options on futures contracts. The Partnership is exposed to both market risk, the risk arising from changes in the fair value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract.

 

Purchase and sale of futures and options on futures contracts requires margin deposits with the futures brokers. Additional deposits may be necessary for any loss on contract fair value. The Commodity Exchange Act requires a futures broker to segregate all customer transactions and assets from such broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury bills) deposited with a futures broker are considered commingled with all other customer funds subject to the futures broker’s segregation requirements. In the event of a futures broker’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than total cash and other property deposited. The net fair value of the Partnership’s assets deposited with Newedge USA, LLC and ADM Investor Services, Inc. is $7,827,666 and $7,038,346, respectively, at March 31, 2014, and $8,210,562 and $3,537,365, respectively, at December 31, 2013.

 

For futures contracts and options on futures contracts, risks arise from changes in the fair value of the contracts. Theoretically, the Partnership is exposed to a market risk equal to the notional contract value of futures contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership to potentially unlimited liability, and purchased options expose the Partnership to a risk of loss limited to the premiums paid.

 

The Partnership has a substantial portion of its assets on deposit with the securities broker in connection with its trading of U.S. government securities and its cash management activities. In the event of the securities broker’s insolvency, recovery of Partnership assets on deposit may be limited to account insurance or other protection afforded such deposits.

 

The Partnership maintains its cash in bank deposit accounts at Wells Fargo Bank, N.A. and affiliates. Such accounts may, at times, exceed federally insured limits. In the event of a financial institution’s insolvency, recovery of cash on deposit may be limited to account insurance or other protection afforded such deposits.

 

The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The Limited Partners bear the risk of loss only to the extent of the fair value of their respective investments and, in certain specific circumstances, distributions and redemptions received.

 

Note 10.

INDEMNIFICATIONS

 

In the normal course of business, the Partnership enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. The Partnership expects the risk of any future obligation under these indemnifications to be remote.

 

 

AIS FUTURES FUND IV L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

Note 11.

FINANCIAL HIGHLIGHTS

 

The following information presents the financial highlights for Series A and C Limited Partners of the Partnership for the three months ended March 31, 2014 and 2013. This information has been derived from information presented in the financial statements.

 

		Three Months Ended								Three Months Ended
		March 31, 2014								March 31, 2013
		Series A				Series C				Series A				Series C
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Total Return for Limited Partners(1)
Total return before General Partner Profit Share allocation			8.57	%			9.02	%			(5.72	)%			(5.32	)%
General Partner Profit Share allocation(2)			0.00	%			0.00	%			0.11	%			0.11	%
Total return after General Partner Profit Share allocation			8.57	%			9.02	%			(5.61	)%			(5.21	)%
Supplemental Data
Ratios to average net asset value:(3)
Expenses, excluding General Partner Profit Share allocation (4)			5.00	%			3.29	%			4.58	%			2.95	%
General Partner Profit Share allocation(1)			0.00	%			0.00	%			0.00	%			0.00	%
Total expenses			5.00	%			3.29	%			4.58	%			2.95	%
Net investment (loss)(4), (5)			(4.95	)%			(3.23	)%			(4.48	)%			(2.85	)%

 

The total returns and ratios are presented for Series A and C Limited Partners taken as a whole. An individual Limited Partner’s total returns and ratios may vary from the above total returns and ratios based on the timing of their subscriptions and redemptions and different fee arrangements for certain Limited Partners.

 

The total returns and ratios exclude the effects of any 2% upfront selling commissions charged by Selling Agents.

 

(1)

Not annualized.

(2)

The positive effect on total return by the General Partner Profit Share allocation for the three months ended March 31, 2013 is due to a significant reversal of the allocation during the three months ended March 31, 2013.

(3)

The ratios of expenses and net investment (loss) to average net asset value do not include brokerage commissions.

(4)

Annualized.

(5)

The net investment (loss) is comprised of interest income less total expenses, excluding brokerage commissions and the General Partner Profit Share allocation.

 

 

PART I – FINANCIAL INFORMATION (CONTINUED)

 

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 conjunction with, the following analysis.

 

Operational Overview

 

Due to the nature of the Partnership’s business, its results of operations depend on the occurrence of major price moves in at least some of the markets traded and the General Partner’s ability to recognize and capitalize on such trends and other profit opportunities.  The General Partner’s trading methods are confidential, so that the only information that can be furnished regarding the Partnership’s results of operations is its performance record.  The Partnership engages in speculative trading of futures contracts and options on futures contracts and physical commodities and other commodity-related contracts and the Partnership may enter into long, short or neutral positions in the markets in which it trades.  Because the Partnership’s trading strategies depend heavily on global price trends (both positive and negative), and these price trends may be affected by global economic conditions and may at times be seasonal, the Partnership will be affected by such conditions and trends.  The past performance of the Partnership 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 Partnership has a better opportunity of being profitable than in others.

 

Liquidity and Capital Resources

 

The Partnership raises additional capital only through the sale of limited partnership interests and capital is increased through trading profits (if any) and interest income.  The Partnership does not engage in borrowing.  The Partnership may offer limited partnership interests for sale as of the close of business at the end of each month.

 

The Partnership trades futures contracts and/or options on futures contracts, both long and short, in each of the following six asset classes: equities, fixed income, currencies, metals, agriculture products and energy products.  Due to the nature of the Partnership’s business, substantially all its assets are represented by cash and U.S. government obligations, while the Partnership maintains its market exposure through open futures contracts and open options on futures contracts.

 

The Partnership’s assets, which are generally held as cash, cash equivalents or U.S. government obligations, are generally used to margin the Partnership’s futures and options on futures positions and are withdrawn, as necessary, to pay redemptions and expenses.  Other than potential market-imposed limitations on liquidity, due, for example, to daily price fluctuation limits, which are inherent in the Partnership’s futures and options on futures trading, the Partnership’s assets are highly liquid and are expected to remain so.

 

There have been no material changes with respect to the Partnership’s critical accounting policies, off-balance sheet arrangements or contractual obligations, as reported in the Partnership’s most recent Annual Report on Form 10-K and any amendments thereto.

 

During its operations for the three months ended March 31, 2014, the Partnership experienced no significant periods of illiquidity in any of the numerous markets traded by the General Partner.

 

 

PART I – FINANCIAL INFORMATION (CONTINUED)

 

Results of Operations

 

Performance Summary

 

Three Months Ended March 31, 2014

 

During the first quarter of 2014, the Partnership experienced net realized and unrealized gains of $3,816,700 from its trading operations, which is net of brokerage commissions of $25,370.  The Partnership incurred total expenses of $491,496, including $237,859 in Selling Agent Administrative and Service Fees, $203,513 in Management Fees (paid to the General Partner) and $50,124 in operating expenses.  The Partnership earned $5,767 in interest income and charged a General Partner Profit Share allocation of $1,462.  An analysis of trading gains and losses (not adjusted for any fees or expenses) by market sector is as follows

 

Sector		% Gain (Loss)
Stock Index			(2.37	)%
Bonds			(2.49	)%
Currency			0.30	%
Energy			3.33	%
Metals			2.30	%
Grains			9.20	%

 

The Partnership earned a profit in the first quarter of 2014. The largest gain came from the long positions in the grains and soybean complex. Additional gains were realized from the long positions in energy, metals, and the currencies (Australian and Canadian dollars). Small losses occurred from the short positions in the U.S. Treasury bonds and the S&P 500.

 

Three Months Ended March 31, 2013

 

During the first quarter of 2013, the Partnership experienced net realized and unrealized gains (losses) of $(3,086,967) from its trading operations, which is net of brokerage commissions of $21,838.  The Partnership incurred total expenses of $785,288, including $408,044 in Selling Agent Administrative and Service Fees, $327,869 in Management Fees (paid to the General Partner) and $49,375 in operating expenses.  The Partnership earned $16,705 in interest income and charged a General Partner Profit Share allocation of $1,192.  An analysis of trading gains and losses (not adjusted for any fees or expenses) by market sector is as follows:

 

Sector		% Gain (Loss)
Stock Index			(0.07	)%
Bonds			0.00	%
Currency			1.63	%
Energy			1.51	%
Metals			(3.69	)%
Grains			(3.36	)%

 

The Partnership experienced a loss in the first quarter of 2013. The largest loss came from long positions in the metals, closely followed by long positions in the grains and soybean complex. A small loss occurred from the short position in the S&P 500. Gains were achieved in the currencies (long positions in the Australian and Canadian dollars and a short position in the Japanese yen) and from long positions in the energy complex. The Partnership had no positions in the bond sector.

 

 

Item 3: Quantitative and Qualitative Disclosures About Market Risk

 

Not required.

 

Item 4: Controls and Procedures

 

The General Partner, with the participation of the General Partner’s principal executive officer 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, has concluded that these disclosure controls and procedures are effective.

 

There were no changes in the General Partner’s internal controls over financial reporting with respect to the Partnership that occurred during the fiscal quarter covered by this quarterly report that has materially affected, or is 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

 

(a)           The requested information has been previously reported on Form 8-K.

 

(b)           Not applicable.

 

(c)           Pursuant to the Partnership’s Limited Partnership Agreement, Limited Partners may withdraw all or part of their capital contributions and undistributed profits, if any, at the end of each calendar month.  The withdrawal by a Limited Partner has no impact on the value of the capital accounts of the remaining Limited Partners.  The following table summarizes the withdrawals by Limited Partners during the first calendar quarter of 2014:

 

Month		Withdrawal Amounts
January 31, 2014		$	602,945
February 28, 2014		$	342,042
March 31, 2014		$	1,095,596

 

Item 3:  Defaults Upon Senior Securities

 

(a)           None.

 

(b)           None.

 

Item 4:  Mine Safety Disclosures

 

Not applicable.

 

 

Item 5:  Other Information

 

(a)           None.

 

(b)           Not applicable.

 

Item 6: Exhibits

 

The following exhibits are incorporated herein by reference as set forth below.

 

Exhibit Number		Description of Document
3.1*		Certificate of Formation of AIS Futures Fund IV L.P.
4.2**		Fourth Amended and Restated Limited Partnership Agreement of AIS Futures Fund IV L.P., dated as of March 1, 2008.

 

The following exhibits are included herewith.

 

Exhibit Number	Description of Document
31.01	Rule 13a-14(a)/15d-14(a) Certification
32.01	Section 1350 Certification

 

^* This exhibit is incorporated by reference to the exhibit of the same number and description filed with the Partnership’s Registration Statement (File No. 000-52599) filed on April 30, 2007 on Form 10 under the Securities Exchange Act of 1934.

 

^** This exhibit is incorporated by reference to the exhibit of the same number and description filed with the Partnership’s Current Report (File No. 000-52599) filed on March 5, 2008 on Form 8-K under the Securities Exchange Act of 1934.

  

 

SIGNATURE

 

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.

 

Dated: May 14, 2014

 

AIS FUTURES FUND IV L.P.

 

By:	AIS CAPITAL MANAGEMENT, L.P.,

General Partner

 

By:	/s/ John Hummel
Name:  John Hummel
Title:  Managing Principal (principal executive and principal financial officer)