UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

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FORM 10-Q

 

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For the quarterly period ended March 31, 2015

 

OR

 

For the transition period from ________ to ___________

Commission File Number: 000-53815

 

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ALTEGRIS QIM FUTURES FUND, L.P.

(Exact name of registrant as specified in its charter)

 

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c/o ALTEGRIS ADVISORS, L.L.C.

1200 Prospect Street, Suite 400

La Jolla, California 92037

(Address of principal executive offices) (zip code)

 

(858) 459-7040

(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  [   ]

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  [   ]  No  [X]

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ALTEGRIS QIM FUTURES FUND, L.P.

STATEMENTS OF FINANCIAL CONDITION

MARCH 31, 2015 (Unaudited) and DECEMBER 31, 2014 (Audited)

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See accompanying notes.

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ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS

MARCH 31, 2015 (Unaudited)

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*	The rate reported is the effective yield at time of purchase.

See accompanying notes.

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ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS (continued)

MARCH 31, 2015 (Unaudited)

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	Range of Expiration Dates		Number of Contracts				Value				% of Partners' Capital
Long Futures Contracts:
Currencies	Jun 15			111			$	2,317				0.01	%
Interest Rates	Jun 15			7				3,036				0.01	%
Stock Indices	Apr 15 - Jun 15			26				(2,469	)			(0.01	)%
Treasury Rates	Jun 15			226				126,790				0.43	%
Total Long Futures Contracts				370				129,674				0.44	%
Short Futures Contracts:
Currencies	Jun 15			10				(52	)			0.00	%
Energy	Apr 15 - May 15			16				35,444				0.11	%
Interest Rates	Jun 15			81				(48,290	)			(0.16	)%
Metals	May 15 - Jun 15			8				13,882				0.05	%
Stock Indices	Apr 15 - Jun 15			193				(27,235	)			(0.09	)%
Total Short Futures Contracts				308				(26,251	)			(0.09	)%
Total Futures Contracts				678			$	103,423				0.35	%

 

See accompanying notes.

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ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014 (Audited)

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*	The rate reported is the effective yield at time of purchase.

See accompanying notes.

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ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS (continued)

DECEMBER 31, 2014 (Audited)

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See accompanying notes.

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ALTEGRIS QIM FUTURES FUND, L.P.

STATEMENTS OF INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 (Unaudited)

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See accompanying notes.

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ALTEGRIS QIM FUTURES FUND, L.P.

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

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 (Unaudited)

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See accompanying notes.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS

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NOTE 1 -

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

A.	General Description of the Partnership

Altegris QIM Futures Fund, L.P. (“Partnership”) was organized as a Delaware limited partnership in June 2009. The Partnership's general partner is Altegris Advisors, L.L.C. (“General Partner”). The Partnership speculatively trades commodity futures contracts, and may trade options on futures contracts, forward contracts and other commodity interests. The objective of the Partnership’s business is appreciation of its assets. It is subject to the regulations of the Commodity Futures Trading Commission (the “CFTC”), an agency of the United States (“U.S.”) government that 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.

B.	Method of Reporting

The Partnership’s financial statements are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Therefore, the Partnership follows the accounting and reporting guidelines for investment companies. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported fair value of assets and liabilities, disclosures of contingent assets and liabilities as of March 31, 2015 and December 31, 2014, and reported amounts of income and expenses for the periods ended March 31, 2015 and 2014, respectively. Management believes that the estimates utilized in preparing the Partnership’s financial statements are reasonable; however, actual results could differ from these estimates and it is reasonably possible that the differences could be material.

The financial information included herein is unaudited; however, such financial information reflects all adjustments which are, in the opinion of management, necessary for the fair presentation of the financial statements for the interim period.

C.	Fair Value

In accordance with the authoritative guidance under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 1 -

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C.	Fair Value (continued)

In determining fair value, the Partnership uses various valuation approaches. The authoritative guidance under U.S. GAAP establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Partnership.

Unobservable inputs reflect the Partnership’s assumption about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 – Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Partnership has the ability to access at the measurement date;

Level 2 – Quoted prices which are not active, or inputs that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

Level 3 – Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The availability of valuation techniques and observable inputs can vary among assets and liabilities and is affected by a wide variety of factors, including the type of asset or liability, whether the asset or liability is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the asset or liability existed. Accordingly, the degree of judgment exercised by the Partnership in determining fair value is greatest for assets and liabilities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined by the lowest level input that is significant to the fair value measurement.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 1 -

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C.	Fair Value (continued)

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Partnership’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Partnership uses prices and inputs that are current as of the measurement date, including prices and inputs during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many assets and liabilities. This condition could cause an asset or liability to be reclassified to a lower level within the fair value hierarchy.

The Partnership values futures contracts at the closing price of the contract’s primary exchange. The Partnership includes futures contracts in Level 1 of the fair value hierarchy, as they are exchange traded derivatives.

The fair value of U.S. government agency bonds and notes is generally based on quoted prices in active markets. When quoted prices are not available, fair value is determined based on a valuation model that uses inputs which include interest-rate yield curves, cross-currency-basis index spreads, and country credit spreads similar to the bond in terms of issue, maturity and seniority. U.S. government agency bonds and notes are categorized in Level 1 or Level 2 of the fair value hierarchy. As of March 31, 2015 and December 31, 2014, none of the Partnership’s holdings in U.S. government agency bonds and notes were fair valued using valuation models.

The fair value of U.S. treasury obligations is generally based on quoted prices in active markets. U.S. treasury obligations are categorized in Level 1 of the fair value hierarchy.

The fair value of corporate notes is determined using recently executed transactions, market price quotations (where observable), notes spreads or credit default swap spreads. The spread data used are for the same maturity as that of the notes. If the spread data does not reference the issuer, data that references a comparable issuer is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, notes, or single-name credit default swap spreads and recovery rates based on collateral values as key inputs. These valuation methods represent both a market and income approach to fair value measurement. Corporate notes are categorized in Level 2 of the fair value hierarchy; however, in instances where significant inputs are unobservable, they are categorized in Level 3 of the hierarchy. As of March 31, 2015 and December 31, 2014, none of the Partnership’s holdings in corporate notes were fair valued using valuation models.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 1 -

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C.	Fair Value (continued)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

There were no changes in the Partnership’s valuation methodology during the periods ended March 31, 2015 and December 31, 2014.

The following table presents information about the Partnership’s assets and liabilities measured at fair value as of March 31, 2015 and December 31, 2014:

(1)	See Note 7. "Financial Derivative Instruments" for the fair value in each type of contracts within this category.

For the three months ended March 31, 2015 and the year ended December 31, 2014, there were no transfers between Level 1 and Level 2 assets and liabilities. For the three months ended March 31, 2015 and the year ended December 31, 2014, there were no Level 3 securities.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 1 -

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D.	Investment Transactions and Investment Income

Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from security transactions are determined using the specific identification cost method. Change in net unrealized gain or loss from the preceding period is reported in the Statements of Income (Loss). Brokerage commissions on securities and other trading fees are reflected as an adjustment to cost or proceeds at the time of the transaction. Interest income is recorded on an accrual basis.

Gains or losses on futures contracts are realized when contracts are closed. Net unrealized gains or losses on open contracts (the difference between contract trade price and quoted market price) are reflected in the Statements of Financial Condition. Any change in net unrealized gain or loss from the preceding period is reported in the Statements of Income (Loss). Brokerage commissions on futures contracts include other trading fees and are incurred as an expense when contracts are opened, and are recognized as trading gains and losses.

Net realized gains and losses from foreign currency related transactions represent gains and losses from sales of foreign currencies, sales and maturities of foreign currency forward contracts, currency gains and losses realized between trade and settlement dates on securities transactions, and the difference between the amounts of interest and foreign withholding taxes recorded on the Partnership’s books and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized appreciation (depreciation) on foreign currency denominated other assets and liabilities arise from changes in the value of assets, other than investments in securities, and liabilities at fiscal year end, resulting from changes in the exchange rates.

JPMorgan Chase Bank, N.A. (the “Custodian”) is the Partnership’s custodian. The Partnership has cash deposited with the Custodian. Societe Generale (the “Clearing Broker”) is the Partnership’s commodity broker. For cash not held with the Clearing Broker the Partnership receives cash management services from an affiliate of the Custodian, J.P. Morgan Investment Management Inc. (“JPMIM”). 

E.	Futures Contracts

The Partnership may engage in futures contracts as part of its investment strategy. Upon entering into a futures contract, the Partnership is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the “initial margin.” Subsequent payments (“variation margin”) are made or received by the Partnership each day, depending on the daily fluctuations in the value of the contract, and are included in unrealized gain (loss) on futures contracts. Due to broker amounts on the Statement of Financial Condition represent the amount of any short fall in the Partnership’s required cash margin. The Partnership recognizes a realized gain or loss when the contract is closed.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 1 -

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E.	Futures Contracts (continued)

There are several risks in connection with the use of futures contracts as an investment option. The change in value of futures contracts primarily corresponds with the value of their underlying instruments. In addition, there is the risk that the Partnership may not be able to enter into a closing transaction because of an illiquid secondary market. Open positions in futures contracts at March 31, 2015 and December 31, 2014 are reflected within the Condensed Schedules of Investments.

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 the Statements of Income (Loss).

G.

Cash

Restricted cash is held as maintenance margin deposits for futures transactions.

At times, the Partnership’s cash balance could exceed the insured amount under the Federal Deposit Insurance Corporation (“FDIC”). The Partnership has not experienced any losses in such accounts and believes it is not subject to any significant counterparty risk related to its cash account.

H.	Offering Costs

Offering costs incurred in connection with the ongoing offering of the Partnership’s interests are borne by the Partnership. These costs include, but are not limited to, legal fees pertaining to updating the Partnership’s offering documents and materials, accounting and printing costs. These costs are charged as an expense when incurred.

I.	Income Taxes

As an entity taxable as a partnership for U.S. Federal income tax purposes; the Partnership itself is not subject to Federal Income tax. 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 and expenses.

The Partnership is required to determine whether its tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 1 -

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

I.	Income Taxes (continued)

appeals or litigation processes, based on the technical merits of the position. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. De-recognition of a tax benefit previously recognized results in the Partnership recording a tax liability that reduces ending partners’ capital. Based on its analysis, the Partnership has determined that it has not incurred any liability for unrecognized tax benefits as of March 31, 2015 and December 31, 2014. However, the Partnership’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. The Partnership is subject to income tax examinations by major taxing authorities for all tax years since 2012.

The Partnership recognizes interest and penalties related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties have been recognized as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014.

J.	Reclassifications

Certain amounts in the 2014 financial statements were reclassified to conform to the 2015 presentation.

NOTE 2 -

PARTNERS’ CAPITAL

A.	Capital Accounts and Allocation of Income and Loss

The Partnership accounts for subscriptions and redemptions on a per partner capital account basis.

The Partnership consists of the General Partner’s Interest, Class A Interests, Class B Interests and Institutional Interests (collectively referred to as “Interests”). Income or loss (prior to management fees, administrative fees, service fees and incentive fees) is allocated pro rata among the partners based on their respective capital accounts as of the end of each month in which the items accrue, pursuant to the terms of the Partnership’s agreement of limited partnership, as may be amended and restated from time to time (the “Agreement”). Class A Interests, Class B Interests and Institutional Interests are then charged with their applicable management fee, administrative fee, service fee and incentive fee in accordance with the Agreement.

No limited partner of the Partnership (each, a “Limited Partner” and collectively the “Limited Partners”) shall be liable for any debts or liabilities of the Partnership or any losses thereof in excess of such Limited Partner's capital contributions, except as may be required by law.

 

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 2 -

PARTNERS’ CAPITAL (CONTINUED)

B.	Subscriptions, Distributions and Redemptions

Investments in the Partnership are made by subscription agreement, subject to acceptance by the General Partner.

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 redemption of capital, subject to restrictions set forth in the Agreement. The General Partner may request and receive redemption of capital, subject to the same terms as any Limited Partner. The partners may withdraw their interests on a monthly basis upon at least 15 days’ prior written notice, subject to the discretion of the General Partner. No distributions were made for the three months ended March 31, 2015 and 2014.

NOTE 3 -

RELATED PARTY TRANSACTIONS

A.	General Partner Management Fee

The General Partner receives a monthly management fee from the Partnership equal to 0.104% (1.25% annually) for Class A and Class B, and 0.0625% (0.75% annually) for Institutional Interests of the Partnership's management fee net asset value. The General Partner may declare any Limited Partner a “Special Limited Partner” and the management fees or incentive fees charged to any such partner may be different than those charged to other Limited Partners. For the three months ended March 31, 2015 and 2014, there were no Special Limited Partners.

Total management fees earned by the General Partner for the three months ended March 31, 2015 and 2014 are shown on the Statements of Income (Loss) as Management Fee.

B.	Administrative Fee

The General Partner receives a monthly administrative fee from the Partnership equal to 0.0275% (0.33% annually) of the Partnership's management fee net asset value attributable to Class A and Class B Interests. For the three months ended March 31, 2015 and 2014, administrative fees for Class A Interests were $17,401 and $31,816, respectively, and administrative fees for Class B Interests were $10,238 and $23,583, respectively.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 3 -

RELATED PARTY TRANSACTIONS (CONTINUED)

C.	Altegris Investments, Inc. and Altegris Clearing Solutions, L.L.C.

Altegris Investments, Inc. (“Altegris Investments”), an affiliate of the General Partner, is registered as a broker-dealer with the Securities Exchange Commission. Altegris Clearing Solutions, L.L.C. (“Altegris Clearing Solutions”), an affiliate of the General Partner and an introducing broker registered with the CFTC, is the Partnership’s introducing broker. Altegris Investments has entered into a selling agreement with the Partnership whereby it receives 2% per annum as continuing compensation for Class A Interests sold by Altegris Investments that are outstanding at month end. Altegris Clearing Solutions, as the Partnership’s introducing broker, receives a portion of the commodity brokerage commissions paid by the Partnership to the Clearing Broker and interest income retained by the Clearing Broker. Additionally, the Partnership pays to its clearing brokers and Altegris Clearing Solutions, at a minimum, brokerage charges at a monthly flat rate of 0.125% (1.5% annually) of the Partnership’s management fee net asset value. Brokerage charges may exceed the flat rate described above, depending on commission and trading volume levels, which may vary.

At March 31, 2015 and December 31, 2014, respectively, the Partnership had commissions and brokerage fees payable to Altegris Clearing Solutions of $13,233 and $29,423 and service fees payable to Altegris Investments of $6,424 and $7,777, respectively. The following tables show the fees paid to Altegris Investments and Altegris Clearing Solutions for the three months ended March 31, 2015 and 2014, respectively:

The amounts above are included in Brokerage Commissions and Service Fees on the Statements of Income (Loss), respectively. The amounts shown on the Statements of Income (Loss) include fees paid to non-related parties.

NOTE 4 -

ADVISORY CONTRACT

The Partnership’s trading activities are conducted pursuant to an advisory contract with Quantitative Investment Management LLC (QIM) (“Advisor”). The Partnership pays the Advisor a quarterly incentive fee of 30% of the trading profits. However, the quarterly incentive fee is payable only on cumulative profits, calculated separately for each partner’s interest, achieved from commodity trading. The incentive fee is accrued on a monthly basis and paid quarterly. Incentive fees are reflected in the Statements of Income (Loss).

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 5 -

SERVICE FEES

Class A Interests pay selling agents an ongoing monthly payment of 0.166% of the month-end net asset value (2% annually) of the value of Interests sold by them which are outstanding at month-end as compensation for their continuing services to such Class A Limited Partners. Institutional Interests may pay selling agents, if the selling agent so elects, an ongoing monthly payment of 0.0417% (0.50% annually) of the value of Institutional Interests sold by them which are outstanding at month-end as compensation for their continuing services to such Limited Partners holding Institutional Interests. However, there were none for the three months ended March 31, 2015 and 2014. For the three months ended March 31, 2015 and 2014, service fees for Class A Interests were $105,070 and $191,161, respectively, and service fees for Institutional Interests were $0 and $125, respectively.

NOTE 6 -

BROKERAGE COMMISSIONS

The Partnership pays brokerage commissions to the Clearing Broker for clearing trades on its behalf, which are reflected in the Statements of Income (Loss) as Brokerage Commissions. The Partnership pays to its Clearing Broker a monthly brokerage commission equal to the greater of: (1) actual brokerage commissions, which are based upon trading volume, or (2) a flat rate of 0.125% (1.5% annually) (the “Minimum Amount”) of the Partnership’s management fee net asset value.

If actual brokerage commissions paid to the Clearing Broker are less than the Minimum Amount, the Partnership will pay to the introducing broker, the difference. However, if actual brokerage commissions are greater than the Minimum Amount, the Partnership only pays the actual brokerage commissions.

NOTE 7 -

FINANCIAL DERIVATIVE INSTRUMENTS

The Partnership engages in the speculative trading of futures contracts 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 Accounting Standards Codification (“ASC”), nor are they used for other risk management purposes. The Advisor and General Partner actively assess, manage and monitor risk exposure on derivatives on a contract basis, a sector basis (e.g., interest rate derivatives, agricultural derivatives, 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.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 7 -

FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

The following presents the fair value of derivative contracts as of March 31, 2015 and December 31, 2014. The fair value of derivative contracts is presented as an asset if in a gain position and a liability if in a loss position. Fair value is presented on a gross basis in the table below even though the derivative contracts qualify for net presentation in the Statements of Financial Condition.

 

 

 

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 7 -

FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

The following presents the trading results of the Partnership’s derivative trading and information related to the volume of the Partnership’s derivative activity for the three months ended March 31, 2015 and 2014.

The below captions of “Realized” and “Change in Unrealized” correspond to the captions in the Statements of Income (Loss) for gain (loss) on trading derivatives contracts.

For the three months ended March 31, 2015, the number of futures contracts closed was 7,398.

For the three months ended March 31, 2014, the number of futures contracts closed was 19,209.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 7 -

FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

With respect to futures contracts and options on futures contracts, the Partnership has entered into an agreement with the Clearing Broker which grants the Clearing Broker the right to offset recognized derivative assets and derivative liabilities if certain conditions exist, which would require the Clearing Broker to liquidate the Partnership’s positions. These events include the following: (i) upon the dissolution, winding-up, liquidation or merger of the Partnership, (ii) failure to maintain initial margin or failure to make timely payment of additional variation margin, (iii) failure to pay the premium on any option purchased, (iv) upon the commencement of bankruptcy, insolvency or similar proceeding for the protection of creditors against the Partnership, (v) the Clearing Broker determines, at its discretion, that the risk in the Partnership’s account must be reduced for protection of the Clearing Broker, or (vi) if the Partnership’s registration status is suspended or is pending suspension.

The following table summarizes the disclosure requirements for offsetting assets and liabilities:

Offsetting the Financial Assets and Derivative Assets

(1)	Does not include maintenance margin deposits held at the Clearing Broker of $5,453,048 for 2015 & $1,966,135 for 2014, respectively.

 

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 8 -

FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND UNCERTAINTIES

The Partnership participates in the speculative trading of commodity futures contracts, substantially all of which are subject to margin requirements. The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges. Further, the Clearing Broker has the right to require margin in excess of the minimum exchange requirement. Risk arises from changes in the value of these contracts (market risk) and the potential inability of brokers to perform under the terms of their contracts (credit risk).

All of the contracts currently traded by the Partnership are exchange traded. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions because, in over-the-counter transactions, the Partnership must rely solely on the credit of its respective individual counterparties. However, in the future, if the Partnership were to enter into non-exchange traded contracts, it would be subject to the credit risk associated with counterparty non-performance. The credit risk from counterparty non-performance associated with such instruments is the net unrealized gain, if any.

The Partnership also has credit risk because the sole counterparty to all domestic futures contracts is the exchange clearing corporation. In addition, the Partnership bears the risk of financial failure by the Clearing Broker. The Partnership's policy is to continuously monitor its exposure to market and counterparty risk through the use of a variety of financial, position and credit exposure reporting and control procedures. In addition, the Partnership has a policy of reviewing the credit standing of each clearing broker or counterparty with which it conducts business.

The Partnership has a substantial portion of its assets on deposit with the Custodian in U.S. government agency bonds and notes and corporate notes. Risks arise from investments in bonds and notes due to possible illiquidity and the potential for default by the issuer or counterparty. Such instruments are also sensitive to changes in interest rates and economic conditions.

NOTE 9 -

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.

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 10 -

FINANCIAL HIGHLIGHTS

The following information presents the financial highlights of the Partnership for the three months ended March 31, 2015 and 2014. This information has been derived from information presented in the financial statements.

Total return and the ratios to average net asset value are calculated for each class of Limited Partners’ capital taken as a whole. An individual Limited Partner’s total return and ratios may vary from the above returns and ratios due to the timing of their contributions and withdrawals and differing fee structures.

Total return is calculated on a monthly compounded basis.

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(1)

Excludes incentive fee.

(2)

Annualized

(3)

Not annualized.

 

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ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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NOTE 11 -

SUBSEQUENT EVENTS

Management of the Partnership evaluated subsequent events through the date these financial statements were available to be issued.

From April 1, 2015 through May 15, 2015, the Partnership had subscriptions of $15,000 and redemptions of $1,642,689. Management has determined there are no additional matters requiring disclosure.

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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.

Liquidity

 

The Partnership’s assets are generally held as cash or cash equivalents, which are used to margin the Partnership’s futures positions and are sold to pay redemptions and expenses as needed.  Other than any potential market-imposed limitations on liquidity, the Partnership’s assets are highly liquid and are expected to remain so.  Market-imposed limitations, when they occur, can be due to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Partnership’s futures trading.  A portion of the Partnership’s assets not used for margin and held with the Custodian are invested in liquid, high quality securities.  Through March 31, 2015 the Partnership experienced no meaningful periods of illiquidity in any of the markets traded by the Advisor on behalf of the Partnership.

Capital Resources

 

The Partnership raises additional capital only through the sale of Interests and capital is increased through trading profits (if any) and interest income.  The Partnership does not engage in borrowing, outside of the margin required as part of its trading activities as discussed in the paragraphs below.

 

The amount of capital raised for the Partnership should not have a significant impact on its operations, as the Partnership has no significant capital expenditure or working capital requirements other than for capital to pay trading losses, brokerage commissions and expenses.  Within broad ranges of capitalization, the Partnership’s trading positions should increase or decrease in approximate proportion to the size of the Partnership.

The Partnership participates in the speculative trading of commodity futures contracts and may trade options on futures contracts and forward contracts, substantially all of which are subject to margin requirements.  The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges.  Further, the Partnership’s futures commission merchants and brokers may require margin in excess of minimum exchange requirements.

 

All of the futures contracts currently traded by the Advisor on behalf of the Partnership are exchange-traded.  The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions because, in over-the-counter transactions, the Partnership must rely solely on the credit of its trading counterparties, whereas exchange-traded contracts are generally, but not universally, backed by the collective credit of the members of the exchange.  

 

The Partnership bears the risk of financial failure by the Clearing Broker and/or other clearing brokers or counterparties with which the Partnership trades. 

Results of Operations

 

The Partnership’s success depends primarily upon the Advisor’s ability to recognize and capitalize on market trends in the sectors of the global commodity futures markets in which it trades.  The Partnership seeks to produce long-term capital appreciation through growth, and not current income.  The past performance of the Partnership is not necessarily indicative of future results.

   

Due to the nature of the Partnership’s trading, the results of operations for the interim period presented should not be considered indicative of the results that may be expected for the entire year.

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Performance Summary

 

During the first quarter of 2015, the Partnership achieved net realized and unrealized gains of $254,099 from its trading activities, net of brokerage commissions of $142,541.  The Partnership incurred total expenses of $342,769, including $113,148 in management fees paid to the General Partner, $424 in incentive fees, and $165,527 in service and professional fees.  The Partnership earned $9,441 in interest income during the first quarter of 2015.  An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the first quarter of 2015 is set forth below. 

First Quarter 2015.  The Partnership experience a slight loss in January largely driven by positions in futures contracts on the Euro, energy and European interest rates.  Long positions in futures contracts on U.S. Treasuries and short positions in futures contracts in the FTSE China A50 index and the S&P index contributed to performance. Long positions in the Euro abruptly turned negative against a market downturn the week following the Swiss National Bank’s decision to abandon its peg to the Euro.  The Partnership’s performance was adversely impacted by long positions in futures contracts in Crude Oil and Brent Oil.  Short positions in European interest rates were the largest detractors to performance during the month.  Steady long positions in futures contracts on U.S. Treasuries contributed positively to performance throughout the month.  The Partnership also benefited from holding short positions in futures contracts on the FTSE China A50 and S&P indices.  The Partnership experienced a gain in February driven by gains in all sectors except metals.  Global stock markets generally climbed throughout the month, a trend that was profitably exploited by the Partnership’s long positions across most markets. Long positions in the DJ Stoxx 50 and the Dax indices were the largest contributors to performance during the month.  The Partnership’s performance also benefited from short positions in the Euro-Bund and long positions in the UK Gilt bond. The Partnership experienced gains on short and long positions in Crude Oil as that market ebbed and flowed several times over the month.  Long positions in Gold adversely impacted the Partnership’s performance. Short positions in futures contracts on U.S. Treasuries detracted from performance. The Partnership experienced a loss in March largely driven by losses in currencies, U.S. stock indices and energies.  Long positions in futures contracts on the Euro were chiefly responsible for the month’s overall performance, as the Euro declined significantly through mid-month against the Partnership’s long position.  Performance was also adversely impacted by long positions in futures contracts on the S&P index early in the month with a mid-month pivot to short positions in the S&P index further degrading performance.  Short positions in the Euro-Bund also hurt performance.  Performance benefited from both long and short positions in futures contracts on U.S. Treasuries, the FTSE China A50, Dax and DJ Euro Stoxx 50 indices and the energy sector.

During the first quarter of 2014, the Partnership achieved net realized and unrealized losses of $950,995 from its trading activities, net of brokerage commissions of $295,160.  The Partnership incurred total expenses of $605,968, including $231,519 in management fees paid to the General Partner, and $278,680 in service and professional fees.  The Partnership earned $17,518 in interest income during the first quarter of 2014.  An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the first quarter of 2014 is set forth below.

First Quarter 2014.  The Partnership experienced a gain in January largely driven by positions in futures contracts on the Euro-Bund, U.S. and European stock indices and natural gas. Long positions in futures contracts on the Euro-Bund and natural gas contributed to performance.  Performance also benefited from holding short positions in futures contracts on the S&P index early in the month and then switching to long positions later in the month.  Early in the month, long positions in futures contracts on the DAX and DJ Euro Stoxx 50 indices added to performance while later in the month short positions benefited performance. The Partnership’s performance was hurt by short positions in futures contracts on the U.S. 10-Year Note, but the positions’ losses were offset by gains in long futures positions in the U.S. Ultra Bond and 30-Year Bond. Performance was adversely impacted by long positions in futures contracts on Japanese stock indices and positions in the Euro.  The Partnership experienced a slight gain in February largely driven by long positions in futures contracts on natural gas and on interest rates.  Long positions on futures in Euro-Bund, Euro-Bobl and U.S. Treasuries and on the S&P index contributed positively to performance.  Performance also benefited from short positions in futures contracts on natural gas late in the month.  Short positions in futures contracts on the S&P and Dax indices were the largest detractors to performance during the month. The Partnership experienced a loss in March driven by losses across all sectors.  Losses were primarily due to long positions in futures contracts on the U.S. 10-Year Note and other U.S. Treasuries early in the month and short positions in the same later in the month.  Positions in futures contracts on the Dax and DJ Euro Stoxx 50 indices and on the Yen contributed to losses as the markets fluctuated generally inverse to the Partnership’s positions.   Contributors to performance included long positions in futures contracts on the S&P index and positions in futures contracts Euro-Bund and Euro-Bobl.

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Off-Balance Sheet Arrangements

 

The Partnership does not engage in off-balance sheet arrangements with other entities.

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 significant changes in the General Partner’s internal controls over financial reporting with respect to the Partnership or in other factors applicable to the Partnership that could significantly affect these controls subsequent to the date of the evaluation.

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) Limited Partners may redeem some or all of their Interest in the Partnership as of the end of any calendar month upon fifteen (15) days’ prior written notice to the General Partner. The Partnership may declare additional redemption dates upon notice to the Limited Partners. The redemption by a Limited Partner has no impact on the value of the capital accounts of the remaining Limited Partners. The following table summarizes the redemptions by Limited Partners during the first calendar quarter of 2015:

 

 

Item 3: Defaults Upon Senior Securities.

(a) None.

(b) None.

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Item 4: Mine Safety Disclosure.

Not applicable.