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EX-32.03 - EXHIBIT 32.03 - Millburn Multi-Markets Fund L.P.s107976_ex32-03.htm
EX-32.02 - EXHIBIT 32.02 - Millburn Multi-Markets Fund L.P.s107976_ex32-02.htm
EX-32.01 - EXHIBIT 32.01 - Millburn Multi-Markets Fund L.P.s107976_ex32-01.htm
EX-31.03 - EXHIBIT 31.03 - Millburn Multi-Markets Fund L.P.s107976_ex31-03.htm
EX-31.02 - EXHIBIT 31.02 - Millburn Multi-Markets Fund L.P.s107976_ex31-02.htm
EX-31.01 - EXHIBIT 31.01 - Millburn Multi-Markets Fund L.P.s107976_ex31-01.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Quarterly Period Ended: September 30, 2017

 

Or

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission File Number: 000-54028

 

MILLBURN MULTI-MARKETS FUND L.P. 

 

 

(Exact name of registrant as specified in its charter)

 

Delaware   26-4038497
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

c/o MILLBURN RIDGEFIELD CORPORATION

411 West Putnam Avenue

Greenwich, Connecticut 06830 

 

 

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (203) 625-7554

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☒  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 ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☒
  Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Yes ☐             No ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No ☒

 

 

 

PART I. FINANANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

Millburn Multi-Markets Fund L.P.    
Financial statements    
For the three and nine months ended September 30, 2017 and 2016 (unaudited)
     
Statements of Financial Condition (a)   1
Statements of Operations (c)   2
Statements of Changes in Partners’ Capital (b)   4
Statements of Financial Highlights (c)   5
Notes to Financial Statements   9

 

(a) At September 30, 2017 and December 31, 2016 (unaudited)

 

(b) For the nine months ended September 30, 2017 and 2016 (unaudited)

 

(c) For the three and nine months ended September 30, 2017 and 2016 (unaudited)

 

 

 

Millburn Multi-Markets Fund L.P.

Statements of Financial Condition (UNAUDITED)

 

  September 30, 2017   December 31, 2016 
ASSETS          
 Investment in Millburn Multi-Markets          
 Trading L.P. (the “Master Fund”)  $179,662,569   $172,886,333 
 Due from the Master Fund   2,480,864    2,876,148 
 Cash and cash equivalents   807,107    2,119,000 
           
            Total assets  $182,950,540   $177,881,481 
           
 LIABILITIES AND PARTNERS’ CAPITAL          
           
 LIABILITIES:          
 Capital contributions received in advance  $807,000   $2,119,000 
 Capital withdrawal payable to Limited Partners   2,480,864    2,076,148 
 Capital withdrawal payable to General Partner       800,000 
 Due to the Master Fund   107     
           
            Total liabilities   3,287,971    4,995,148 
           
 PARTNERS’ CAPITAL:          
 General Partner   2,897,144    2,779,224 
           
 Limited partners:          
 Series A (143,576.1126 and 140,590.2950 units outstanding)   163,661,026    158,782,193 
 Series B (6,982.9299 and 7,017.8811 units outstanding)   8,976,840    8,846,058 
 Series C (3,146.8994 and 1,930.6399 units outstanding)   4,127,559    2,478,858 
           
            Total limited partners   176,765,425    170,107,109 
           
            Total partners’ capital   179,662,569    172,886,333 
           
 TOTAL  $182,950,540   $177,881,481 
           
 NET ASSET VALUE PER UNIT OUTSTANDING:          
 Series A  $1,139.89   $1,129.40 
 Series B  $1,285.54   $1,260.50 
 Series C  $1,311.63   $1,283.96 

 

 See notes to financial statements (Unaudited) 

 

1

 

 

Millburn Multi-Markets Fund L.P.

Statements of Operations (UNAUDITED)

 

   For the three months ended 
   September  30, 2017   September  30, 2016 
 INVESTMENT INCOME:          
 Interest income (allocated from the Master Fund)  $399,476   $168,252 
           
 EXPENSES:          
 Management fees   912,657    796,810 
 Brokerage commissions (allocated from the Master Fund)   144,862    90,460 
 Selling commissions and platform fees   847,959    723,400 
 Administrative and operating expenses   159,790    203,842 
 Custody fees and other expenses (allocated from the Master Fund)   8,005    6,867 
           
 Total expenses   2,073,273    1,821,379 
           
 NET INVESTMENT LOSS   (1,673,797)   (1,653,127)
           
 REALIZED AND UNREALIZED GAINS (LOSSES)          
 ALLOCATED FROM THE MASTER FUND          
 Net realized gains (losses) on closed positions:          
 Futures and forward currency contracts   (684,481)   5,049,885 
 Foreign exchange translation   258,680    (23,059)
 Net change in unrealized:          
 Futures and forward currency contracts   7,997,669    (2,088,358)
 Foreign exchange translation   (14,722)   81,655 
 Net gains (losses) from U.S. Treasury notes:          
 Net change in unrealized   42,731    (32,504)
           
Net realized and unrealized gains allocated from the Master Fund   7,599,877    2,987,619 
           
 NET INCOME   5,926,080    1,334,492 
           
 LESS PROFIT SHARE ALLOCATION   386,837    254,063 
 FROM THE MASTER FUND          
           
 NET INCOME AFTER PROFIT SHARE  $5,539,243   $1,080,429 

 

(Continued)

 

2

 

 

Millburn Multi-Markets Fund L.P.

Statements of Operations (UNAUDITED)

 

   For the nine months ended 
   September  30, 2017   September  30, 2016 
 INVESTMENT INCOME:          
 Interest income (allocated from the Master Fund)  $1,005,972   $380,227 
           
 EXPENSES:          
 Management fees   2,709,419    2,114,538 
 Brokerage commissions (allocated from the Master Fund)   391,150    267,872 
 Selling commissions and platform fees   2,523,380    1,919,462 
 Administrative and operating expenses   490,833    541,800 
 Custody fees and other expenses (allocated from the Master Fund)   24,797    18,562 
           
 Total expenses   6,139,579    4,862,234 
           
 NET INVESTMENT LOSS   (5,133,607)   (4,482,007)
           
 REALIZED AND UNREALIZED GAINS (LOSSES)          
 ALLOCATED FROM THE MASTER FUND          
 Net realized gains on closed positions:          
 Futures and forward currency contracts   12,685,017    24,569,098 
 Foreign exchange translation   242,374    33,396 
 Net change in unrealized:          
 Futures and forward currency contracts   (5,837,585)   1,140,607 
 Foreign exchange translation   397,153    71,004 
 Net gains (losses) from U.S. Treasury notes:          
 Net change in unrealized   (73,085)   120,649 
           
Net realized and unrealized gains allocated from the Master Fund   7,413,874    25,934,754 
           
 NET INCOME   2,280,267    21,452,747 
           
 LESS PROFIT SHARE ALLOCATION   446,914    3,763,011 
 FROM THE MASTER FUND          
           
 NET INCOME AFTER PROFIT SHARE  $1,833,353   $17,689,736 

 

See notes to financial statements (Unaudited)(Concluded)

 

3

 

 

Millburn Multi-Markets Fund L.P. 

Statements of Changes in Partners’ Capital (UNAUDITED) 

For the nine months ended September 30, 2017 and 2016

 

       Limited Partners     
   General                             
   Partner   Series A   Series B   Series C   Total 
   Amount   Amount   Units   Amount   Units   Amount   Units   Amount 
                                 
PARTNERS’ CAPITAL — December 31, 2016  $2,779,224   $158,782,193    140,590.2950   $8,846,058    7,017.8811   $2,478,858    1,930.6399   $172,886,333 
                                         
Capital contributions       22,783,577    19,836.2183    952,000    752.2613    315,000    240.6106    24,050,577 
Capital withdrawals       (17,672,573)   (15,358.9212)   (1,011,080)   (787.2125)   (424,041)   (321.7214)   (19,107,694)
Transfers between Series        (1,663,205)   (1,491.4795)             1,663,205    1,297.3703     
   Net income before profit share   117,920    1,806,103        240,618        115,626        2,280,267 
Profit share        (375,069)        (50,756)        (21,089)        (446,914)
PARTNERS’ CAPITAL — September 30, 2017  $2,897,144   $163,661,026    143,576.1126   $8,976,840    6,982.9299   $4,127,559    3,146.8994   $179,662,569 
                                         
Net Asset Value per Unit at September 30, 2017            $1,139.89        $1,285.54        $1,311.63      

  

       Limited Partners     
   General                             
   Partner   Series A   Series B   Series C   Total 
   Amount   Amount   Units   Amount   Units   Amount   Units   Amount 
                                 
PARTNERS’ CAPITAL — December 31, 2015  $3,041,602   $108,146,251    106,145.4501   $8,380,703    7,449.1566   $2,626,676    2,297.6071   $122,195,232 
                                         
Capital contributions       29,227,508    25,854.3736    319,876    250.1280            29,547,384 
Capital withdrawals       (7,576,692)   (6,833.8174)   (826,341)   (650.8812)   (408,752)   (333.7870)   (8,811,785)
   Net income before profit share   622,943    18,842,533        1,533,908        453,363        21,452,747 
Profit share        (3,365,557)        (307,481)        (89,973)        (3,763,011)
PARTNERS’ CAPITAL — September 30, 2016  $3,664,545   $145,274,043    125,166.0063   $9,100,665    7,048.4034   $2,581,314    1,963.8201   $160,620,567 
                                         
Net Asset Value per Unit at September 30, 2016            $1,160.65        $1,291.17        $1,314.44      

 

See notes to financial statements (Unaudited)

 

4

 

 

Millburn Multi-Markets Fund L.P. 

Statement of Financial Highlights (UNAUDITED) 

For the three months ended September 30, 2017

 

The following information presents per unit operating performance data for each series for the three months ended September 30, 2017.

 

 

Per Unit Performance            
 (For a Unit Outstanding Throughout the Period)    Series A      Series B      Series C  
                
 NET ASSET VALUE PER UNIT — Beginning of period  $1,106.68   $1,246.45   $1,271.22 
                
 INCOME (LOSS) ALLOCATED FROM MASTER FUND:               
   Net investment loss (1)   (10.88)   (6.39)   (5.98)
   Total trading and investing gains (1)   46.27    52.12    52.95 
                
            Net income before profit share allocation from Master Fund   35.39    45.73    46.97 
                
   Less: profit share allocation from Master Fund (1) (6)   2.18    6.64    6.56 
                
            Net income from operations after profit share allocation from Master Fund   33.21    39.09    40.41 
                
 NET ASSET VALUE PER UNIT — End of period  $1,139.89   $1,285.54   $1,311.63 
                
 TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)   3.19%   3.66%   3.68%
                
 LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)   0.19    0.52    0.50 
                
 TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)   3.00%   3.14%   3.18%
                
 RATIOS TO AVERAGE NET ASSET VALUE:               
   Expenses (3) (4) (5)   4.69%   2.86%   2.70%
   Profit share allocation from Master Fund (2) (6)   0.19    0.52    0.50 
                
 Total expenses   4.88%   3.38%   3.20%
                
 Net investment loss (3) (4) (5)   (3.83)%   (1.99)%   (1.82)%

 

(1)The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

(2)Not Annualized.

(3)Annualized.

(4)Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.

(5)Excludes profit share allocation from the Master Fund.

(6)Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

 (Continued)

 

5

 

 

Millburn Multi-Markets Fund L.P. 

Statement of Financial Highlights (UNAUDITED)

For the nine months ended September 30, 2017

 

The following information presents per unit operating performance data for each series for the nine months ended September 30, 2017.

 

Per Unit Performance         
 (For a Unit Outstanding Throughout the Period)    Series A      Series B      Series C  
                
 NET ASSET VALUE PER UNIT — Beginning of period  $1,129.40   $1,260.50   $1,283.96 
                
 INCOME (LOSS) ALLOCATED FROM MASTER FUND:               
   Net investment loss (1)   (33.77)   (20.83)   (19.08)
   Total trading and investing gains (1)   47.07    52.83    54.61 
                
            Net income before profit share allocation from Master Fund   13.30    32.00    35.53 
                
   Less: profit share allocation from Master Fund (1) (6)   2.81    6.96    7.86 
                
            Net income from operations after profit share allocation from Master Fund   10.49    25.04    27.67 
                
 NET ASSET VALUE PER UNIT — End of period  $1,139.89   $1,285.54   $1,311.63 
                
 TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)   1.15%   2.55%   2.88%
                
 LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)   0.22    0.56    0.72 
                
 TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)   0.93%   1.99%   2.16%
                
 RATIOS TO AVERAGE NET ASSET VALUE:               
   Expenses (3) (4) (5)   4.68%   2.90%   2.68%
   Profit share allocation from Master Fund (2) (6)   0.22    0.56    0.72 
                
 Total expenses   4.90%   3.46%   3.40%
                
 Net investment loss (3) (4) (5)   (3.94)%   (2.17)%   (1.93)%

 

(1) The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. 
(2) Not Annualized. 
(3) Annualized. 
(4) Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund. 
(5) Excludes profit share allocation from the Master Fund. 
(6) Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity. 

 

See notes to financial statements (Unaudited)

(Concluded)

 

6 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended September 30, 2016

 

The following information presents per unit operating performance data for each series for the three months ended September 30, 2016.

 

Per Unit Performance         
 (For a Unit Outstanding Throughout the Period)    Series A      Series B      Series C  
                
 NET ASSET VALUE PER UNIT — Beginning of period  $1,153.29   $1,278.43   $1,300.62 
                
 INCOME (LOSS) ALLOCATED FROM MASTER FUND:               
   Net investment loss (1)   (12.73)   (8.53)   (7.85)
   Total trading and investing gains (1)   20.66    24.81    26.11 
                
            Net income before profit share allocation from Master Fund   7.93    16.28    18.26 
                
   Less: profit share allocation from Master Fund (1) (6)   0.57    3.54    4.44 
                
            Net income from operations after profit share allocation from Master Fund   7.36    12.74    13.82 
                
 NET ASSET VALUE PER UNIT — End of period  $1,160.65   $1,291.17   $1,314.44 
                
 TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)   0.80%   1.25%   1.31%
                
 LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)   0.16    0.25    0.25 
                
 TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)   0.64%   1.00%   1.06%
                
 RATIOS TO AVERAGE NET ASSET VALUE:               
   Expenses (3) (4) (5)   4.81%   3.08%   2.83%
   Profit share allocation from Master Fund (2) (6)   0.16    0.25    0.25 
                
 Total expenses   4.97%   3.33%   3.08%
                
 Net investment loss (3) (4) (5)   (4.39)%   (2.65)%   (2.40)%

 

(1) The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.
(2) Not Annualized.
(3) Annualized.
(4) Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.
(5) Excludes profit share allocation from the Master Fund.
(6) Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

(Continued)

 

7 

 

Millburn Multi-Markets Fund L.P. 

Statement of Financial Highlights (UNAUDITED) 

For the nine months ended September 30, 2016

 

The following information presents per unit operating performance data for each series for the nine months ended September 30, 2016.

 

Per Unit Performance         
 (For a Unit Outstanding Throughout the Period)    Series A      Series B      Series C  
                
 NET ASSET VALUE PER UNIT — Beginning of period  $1,018.85   $1,125.05   $1,143.22 
                
 INCOME (LOSS) ALLOCATED FROM MASTER FUND:               
   Net investment loss (1)   (37.48)   (25.28)   (23.34)
   Total trading and investing gains (1)   209.06    233.21    236.78 
                
            Net income before profit share allocation from Master Fund   171.58    207.93    213.44 
                
   Less: profit share allocation from Master Fund (1) (6)   29.78    41.81    42.22 
                
            Net income from operations after profit share allocation from Master Fund   141.80    166.12    171.22 
                
 NET ASSET VALUE PER UNIT — End of period  $1,160.65   $1,291.17   $1,314.44 
                
 TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)   16.58%   18.14%   18.36%
                
 LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)   2.66    3.38    3.38 
                
 TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)   13.92%   14.76%   14.98%
                
 RATIOS TO AVERAGE NET ASSET VALUE:               
   Expenses (3) (4) (5)   4.83%   3.08%   2.83%
   Profit share allocation from Master Fund (2) (6)   2.66    3.38    3.38 
                
 Total expenses   7.49%   6.46%   6.21%
                
 Net investment loss (3) (4) (5)   (4.47)%   (2.73)%   (2.48)%

 

(1) The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. 
(2) Not Annualized. 
(3) Annualized. 
(4) Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund. 
(5) Excludes profit share allocation from the Master Fund. 
(6) Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity. 

 

See notes to financial statements (Unaudited)

 (Concluded)

 

8 

 

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Millburn Multi-Markets Fund L.P.’s (the “Partnership”) financial condition at September 30, 2017 (unaudited) and December 31, 2016 and the results of its operations for the three and nine months ended September 30, 2017 and 2016 (unaudited).

 

These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Partnership’s 2016 annual report included in Form 10-K filed with the Securities and Exchange Commission. The December 31, 2016 information has been derived from the audited financial statements as of December 31, 2016.

 

The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”), as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”), requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.

 

The Partnership enters into contracts with various financial institutions that contain a variety of indemnification provisions. The Partnership’s maximum exposure under these arrangements is unknown. However, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

 

The Income Taxes topic of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2014 to 2017, Millburn Ridgefield Corporation (the “General Partner”) has determined that no reserves for uncertain tax positions were required.

 

There have been no material changes with respect to the Partnership’s critical accounting policies, off-balance sheet arrangements or disclosure of contractual obligations as reported in the Partnership’s Annual Report on Form 10-K for fiscal year 2016.

 

2. INVESTMENT IN MILLBURN MULTI-MARKETS TRADING L.P.

 

The Partnership invests substantially all of its assets in Millburn Multi-Markets Trading L.P. (the “Master Fund”). The Partnership’s ownership percentage of the Master Fund at September 30, 2017 and December 31, 2016 was 36.51% and 74.91%, respectively, of total partners’ capital of the Master Fund. See the attached financial statements of the Master Fund.

 

3. RELATED PARTY TRANSACTIONS

 

The Partnership bears its own expenses, including, but not limited to, periodic legal, accounting and filing fees. Total operating expenses related to investors in the Partnership (including their pro-rata share of Master Fund expenses) are not expected to exceed 1/2 of 1% per annum of the Partnership’s average month-end partners’ capital.

 

Prior to January 1, 2017, the General Partner was paid a monthly Administration Fee for administration services it provides calculated as a percentage of the month-end net asset value (prior to reduction for withdrawals or redemptions, management fees, amounts payable to selling agents and the administration fee then being calculated) of the Master Fund equal to 0.05% per annum of the Master Fund’s average net assets. As of January 1, 2017, the Administration Fee was no longer being charged. The Partnership was allocated its pro-rata portion of the administration fee which was charged at the Master Fund level. As of December 31, 2016, $9,903 was payable by the Master Fund to the General Partner and was included in “accrued expenses” in the Master Fund’s Statements of Financial Condition.

 

Series A Limited Partners that redeem Units at or prior to the end of the first eleven months after such Units are sold shall be assessed redemption charges calculated based on their redeemed Units’ net asset value as of the date of redemption. All redemption charges will be paid to the General Partner. At September 30, 2017 and December 31, 2016, there were no redemption charges owed to the General Partner.

 

Effective August 24, 2017, the Partnership began offering a new Series D which, like Series A, will be offered to accredited investors acquiring units through certain selling agents. The only difference between Series D and the other Partnership interests are its fees. No Series D Units have been issued as of November 13, 2017.

 

 9

 

4. FINANCIAL HIGHLIGHTS

 

Per Unit operating performance for Series A, Series B and Series C Units is calculated based on Limited Partners’ Partnership capital for each series taken as a whole utilizing the beginning and ending net asset value per unit and weighted average number of units during the period. Weighted average number of units of each series is detailed below.

 

   Three months ended September 30,   Nine months ended September 30, 
   2017   2016   2017   2016 

 Series A   148,282.529    123,785.440    146,547.251    113,006.923 
 Series B   7,014.374    7,188.676    7,010.924    7,354.335 
 Series C   2,814.813    2,012.683    2,251.568    2,131.661 

 

 

5. SUBSEQUENT EVENTS

 

The General Partner has performed its evaluation of subsequent events from October 1, 2017 to November 13, 2017, the date this form 10-Q was filed. Based on such evaluation, no events were discovered that required disclosure or adjustment to the financial statements.

  

 10

 

Millburn Multi-Markets Trading L.P.    
Financial statements    
For the three and nine months ended September 30, 2017 and 2016 (unaudited)    
     
Statements of Financial Condition (a)   11
Condensed Schedules of Investments (a)   12
Statements of Operations (c)   16
Statements of Changes in Partners’ Capital (b)   18
Statements of Financial Highlights (c)   19
Notes to Financial Statements   21

 

(a) At September 30, 2017 and December 31, 2016 (unaudited)

 

(b) For the nine months ended September 30, 2017 and 2016 (unaudited)

 

(c) For the three and nine months ended September 30, 2017 and 2016 (unaudited)

 

 

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Condition (UNAUDITED)

 

   September 30,   December 31, 
   2017   2016 
ASSETS        
         
 EQUITY IN TRADING ACCOUNTS:          
   Investments in U.S. Treasury notes — at fair value (amortized cost $105,728,604 and $27,441,546)  $105,651,347   $27,428,997 
   Net unrealized appreciation on open futures and forward currency contracts   2,658,334    5,155,330 
   Due from brokers   211,627    547,898 
   Cash denominated in foreign currencies (cost $23,708,420 and $6,590,374)   24,152,999    6,335,327 
           
            Total equity in trading accounts   132,674,307    39,467,552 
           
 INVESTMENTS IN U.S. TREASURY NOTES — at fair value          
   (amortized cost $356,699,373 and $179,527,858)   356,505,453    179,440,654 
           
 CASH AND CASH EQUIVALENTS   24,156,217    19,892,072 
           
 ACCRUED INTEREST RECEIVABLE   1,072,127    414,884 
           
 DUE FROM MILLBURN MULTI-MARKETS LTD.   4,638    100 
           
 DUE FROM MILLBURN MULTI-MARKETS FUND L.P.   107     
           
 TOTAL  $514,412,849   $239,215,262 
           
 LIABILITIES AND PARTNERS’ CAPITAL          
           
 LIABILITIES:          
   Net unrealized depreciation on open futures and forward currency contracts  $5,854,364   $ 
   Capital withdrawal payable to Limited Partners   2,580,068    2,929,148 
   Capital withdrawal payable to General Partner       3,294,748 
   Management fee payable   606,037    320,223 
   Selling commissions payable   277,610    271,795 
   Accrued expenses   168,825    184,565 
   Due to brokers   11,705,760    1,390,404 
   Commissions and other trading fees on open futures contracts   78,029    24,334 
   Accrued profit share   1,037,700     
           
            Total liabilities   22,308,393    8,415,217 
           
 PARTNERS’ CAPITAL   492,104,456    230,800,045 
           
 TOTAL  $514,412,849   $239,215,262 

 

See notes to financial statements (Unaudited)

  

 11

 

Millburn Multi-Markets Trading L.P. 

Condensed Schedule of Investments (UNAUDITED)

September 30, 2017

 

   Net Unrealized     
   Appreciation     
   (Depreciation)   Net Unrealized 
   as a % of   Appreciation 
FUTURES AND FORWARD CURRENCY CONTRACTS  Partners’ Capital   (Depreciation) 
         
 FUTURES CONTRACTS          
   Long futures contracts:          
     Energies   0.18%  $878,300 
     Interest rates   (1.17)   (5,745,739)
     Metals   (0.24)   (1,166,120)
     Softs   (0.01)   (31,163)
     Stock indices   1.47    7,219,201 
           
            Total long futures contracts   0.23    1,154,479 
           
   Short futures contracts:          
     Energies   (0.19)   (941,765)
     Grains   0.48    2,360,148 
     Interest rates   0.02    104,691 
     Livestock   (0.04)   (221,420)
     Metals   (0.11)   (540,828)
     Softs   0.05    245,113 
     Stock indices   0.10    497,916 
           
            Total short futures contracts   0.31    1,503,855 
           
 TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net   0.54    2,658,334 
           
 FORWARD CURRENCY CONTRACTS          
   Total long forward currency contracts   (1.66)   (8,188,369)
   Total short forward currency contracts   0.47    2,334,005 
           
 TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net   (1.19)   (5,854,364)
           
 TOTAL   (0.65)%  $(3,196,030)

 

(Continued)

 

 12

 

Millburn Multi-Markets Trading L.P. 

Condensed Schedule of Investments (UNAUDITED)

September 30, 2017

 

U.S. TREASURY NOTES

             
Face Amount   Description  Fair Value
as a % of  
Partners'
Capital
   Fair Value 
             
$104,940,000    U.S. Treasury notes, 0.875%, 11/15/2017   21.32%  $104,931,802 
 116,040,000    U.S. Treasury notes, 1.000%, 02/15/2018   23.57    115,992,405 
 101,240,000    U.S. Treasury notes, 1.000%, 05/15/2018   20.54    101,101,586 
 140,540,000    U.S. Treasury notes, 1.000%, 08/15/2018   28.48    140,131,007 
      Total investments in U.S. Treasury notes          
      (amortized cost $462,427,977)   93.91%  $462,156,800 

 

See notes to financial statements (Unaudited) (Concluded)

 

 13

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2016

 

FUTURES AND FORWARD CURRENCY CONTRACTS  Net Unrealized Appreciation (Depreciation)
as a % of
Partners’ Capital
   Net Unrealized Appreciation (Depreciation) 
         
 FUTURES CONTRACTS          
   Long futures contracts:          
     Energies   0.05%  $115,591 
     Grains   (0.00)   (2,980)
     Interest rates          
 10 Year U.S. Treasury Note (4 contracts, settlement date March 2017)   0.00    3,188 
 Other interest rates   0.96    2,222,359 
           
 Total interest rates   0.96    2,225,547 
           
     Livestock   0.00    2,280 
     Metals   (0.01)   (22,535)
     Softs   (0.04)   (87,444)
     Stock indices   0.53    1,211,342 
           
     Total long futures contracts   1.49    3,441,801 
           
   Short futures contracts:          
     Energies   (0.03)   (75,226)
     Grains   0.02    51,885 
     Interest rates   (0.01)   (31,802)
     Metals   0.12    288,271 
     Softs   0.02    52,670 
     Stock indices   (0.14)   (319,227)
           
     Total short futures contracts   (0.02)   (33,429)
           
 TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net   1.47    3,408,372 
           
 FORWARD CURRENCY CONTRACTS          
   Total long forward currency contracts   (0.34)   (784,446)
   Total short forward currency contracts   1.10    2,531,404 
           
 TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net   0.76    1,746,958 
           
 TOTAL   2.23%  $5,155,330 

 

(Continued)

 

14

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2016

 

U.S. TREASURY NOTES

 

Face
Amount
   Description  Fair Value as
a % of  
Partners’
Capital
   Fair Value 
             
$51,750,000    U.S. Treasury notes, 0.625%, 02/15/2017   22.43%  $51,755,054 
 51,140,000    U.S. Treasury notes, 0.875%, 05/15/2017   22.18    51,192,938 
 53,140,000    U.S. Treasury notes, 0.875%, 08/15/2017   23.04    53,186,705 
 50,730,000    U.S. Treasury notes, 0.875%, 11/15/2017   21.98    50,734,954 
      Total investments in U.S. Treasury notes          
      (amortized cost $206,969,404)   89.63%  $206,869,651 

 

See notes to financial statements (Unaudited) (Concluded)

 

15

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED)

 

   For the three months ended 
   September 30,   September 30, 
   2017   2016 
 INVESTMENT INCOME — Interest income  $1,075,657   $223,115 
           
 EXPENSES:          
 Brokerage fees   386,487    119,909 
 Management fees   1,815,461    854,090 
 Selling commissions and platform fees   854,342    727,086 
 Administrative and operating expenses   264,296    237,029 
 Custody fees and other expenses   21,184    9,048 
 Total expenses   3,341,770    1,947,162 
           
 NET INVESTMENT LOSS   (2,266,113)   (1,724,047)
           
 REALIZED AND UNREALIZED GAINS (LOSSES):          
 Net realized gains (losses) on closed positions:          
 Futures and forward currency contracts   (1,747,412)   6,638,522 
 Foreign exchange translation   694,984    (30,834)
 Net change in unrealized:          
 Futures and forward currency contracts   20,864,904    (2,673,356)
 Foreign exchange translation   (54,959)   108,847 
 Net gains (losses) from U.S. Treasury notes          
   Net change in unrealized   110,333    (41,816)
 Total net realized and unrealized gains   19,867,850    4,001,363 
           
 NET INCOME   17,601,737    2,277,316 
 LESS PROFIT SHARE TO GENERAL PARTNER   1,067,296    288,402 
 NET INCOME AFTER PROFIT SHARE TO GENERAL PARTNER  $16,534,441   $1,988,914 

 

(Continued)

 

16

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED)

 

   For the nine months ended 
   September 30,   September 30, 
   2017   2016 
 INVESTMENT INCOME — Interest income  $2,275,095   $513,124 
           
 EXPENSES:          
 Brokerage fees   871,023    362,716 
 Management fees   4,478,516    2,294,452 
 Selling commissions and platform fees   2,539,008    1,930,026 
 Administrative and operating expenses   728,341    637,347 
 Custody fees and other expenses   50,520    24,926 
 Total expenses   8,667,408    5,249,467 
           
 NET INVESTMENT LOSS   (6,392,313)   (4,736,343)
           
 REALIZED AND UNREALIZED GAINS (LOSSES):          
 Net realized gains on closed positions:          
 Futures and forward currency contracts   21,107,114    33,271,030 
 Foreign exchange translation   657,370    44,857 
 Net change in unrealized:          
 Futures and forward currency contracts   (8,351,360)   1,591,820 
 Foreign exchange translation   699,626    96,757 
 Net gains (losses) from U.S. Treasury notes          
   Net change in unrealized   (171,424)   164,877 
 Total net realized and unrealized gains   13,941,326    35,169,341 
           
 NET INCOME   7,549,013    30,432,998 
 LESS PROFIT SHARE TO GENERAL PARTNER   1,130,868    4,090,106 
 NET INCOME AFTER PROFIT SHARE TO GENERAL PARTNER  $6,418,145   $26,342,892 

 

(Concluded)

 See notes to financial statements (Unaudited)

 

17

 

 

 

Millburn Multi-Markets Trading L.P.

Statements of Changes in Partners’ Capital (UNAUDITED)

 

For the nine months ended September 30, 2017:

 

   Limited Partners   New Profit Memo Account   General Partner   Total 
 PARTNERS’ CAPITAL - January 1, 2017  $229,993,162   $   $806,883   $230,800,045 
 Contributions   276,213,975    93,168        276,307,143 
 Withdrawals   (21,420,877)           (21,420,877)
 Net income (loss) before profit share   7,514,367    (1,017)   35,663    7,549,013 
 General Partner’s allocation - profit share   (1,130,868)           (1,130,868)
 PARTNERS’ CAPITAL- September 30, 2017  $491,169,759  $92,151  $842,546  $492,104,456 

 

For the nine months ended September 30, 2016:

 

   Limited Partners   New Profit Memo Account   General Partner   Total 
 PARTNERS’ CAPITAL - January 1, 2016  $167,109,009   $   $938,206   $168,047,215 
 Contributions   35,397,382    186,437        35,583,819 
 Withdrawals   (12,824,862)           (12,824,862)
 Net income before profit share   30,225,381    13,344    194,273    30,432,998 
 General Partner’s allocation - profit share   (4,090,106)           (4,090,106)
 PARTNERS’ CAPITAL- September 30, 2016  $215,816,804  $199,781  $1,132,479  $217,149,064 

 

See notes to financial statements (Unaudited)

 

18

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Highlights (UNAUDITED)

 

The following information presents financial highlights of a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and an annual profit share of 20% of Trading Profits (as defined in the Limited Partnership Agreement).

 

   For the three months ended   For the nine months ended 
   September 30,   September 30,   September 30,   September 30, 
   2017   2016   2017   2016 
                 
 Total return before General Partner profit share allocation (3)   3.74%   1.38%   2.86%   18.57%
 Less: General Partner profit share allocation (3)   0.56    0.28    0.56    3.44 
                     
 Total return after General Partner profit share allocation (3)   3.18%   1.10%   2.30%   15.13%
                     
 Ratios to average net asset value:                    
   Expenses (1) (4)   2.44%   2.52%   2.44%   2.54%
   General Partner profit share allocation (3)   0.56    0.28    0.56    3.44 
                     
 Total expenses (1)   3.00%   2.80%   3.00%   5.98%
                     
 Net investment loss (1) (2) (4)   (1.56)%   (2.08)%   (1.71)%   (2.18)%

 

Total returns and the ratios to average net asset value are calculated for a Limited Partner. An individual Limited Partner’s total returns and ratios may vary from the above total returns and ratios based on different management fee and General Partner profit share allocation agreements and the timing of contributions and withdrawals.

 

(1)Includes the Partnership’s proportionate share of expenses allocated from the Partnership’s operations.
(2)Excludes General Partner profit share allocation and includes interest income.
(3)Not Annualized.
(4)Annualized.

 

See notes to financial statements (Unaudited)

 

19

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Highlights (UNAUDITED)

 

The following information presents financial highlights for Limited Partners as a whole.

 

   For the three months ended   For the nine months ended 
   September 30,   September 30,   September 30,   September 30, 
   2017   2016   2017   2016 
                 
 Total return before General Partner profit share allocation (3)   3.69%   1.07%   2.31%   17.66%
 Less: General Partner profit share allocation (3)   0.22    0.14    0.29    2.13 
                     
 Total return after General Partner profit share allocation (3)   3.47%   0.93%   2.02%   15.53%
                     
 Ratios to average net asset value:                    
   Expenses (1) (4)   2.68%   3.68%   2.91%   3.64%
   General Partner profit share allocation (3)   0.22    0.14    0.29    2.13 
                     
 Total expenses (1)   2.90%   3.82%   3.20%   5.77%
                     
 Net investment loss (1) (2) (4)   (1.80)%   (3.24)%   (2.14)%   (3.28)%

 

Total returns and the ratios to average net asset value are calculated for a Limited Partner. An individual Limited Partner’s total returns and ratios may vary from the above total returns and ratios based on different management fee and General Partner profit share allocation agreements and the timing of contributions and withdrawals.

 

(1)Includes the proportionate share of expenses of the Partnership and the Cayman Feeder for the period ending September 30, 2017 and September 30, 2016.
(2)Excludes General Partner profit share allocation and includes interest income.
(3)Not Annualized.
(4)Annualized.

 

See notes to financial statements (Unaudited)

 

20

 

 

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Master Fund engages in the speculative trading of futures and forward currency contracts and also acts as a master fund for the Partnership and Millburn Multi-Markets Ltd., a Cayman Islands exempted company (the “Cayman Feeder”).

 

The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Master Fund’s financial condition at September 30, 2017 (unaudited) and December 31, 2016 and the results of its operations for the three and nine months ended September 30, 2017 and 2016 (unaudited).

 

These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Master Fund’s annual report for the year ended December 31, 2016 included in the Partnership’s annual report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2016 information has been derived from the audited financial statements as of December 31, 2016.

 

The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”), as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”), requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.

 

The Master Fund enters into contracts with various financial institutions that contain a variety of indemnifications. The Master Fund’s maximum exposure under these arrangements is unknown. However, the Master Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

 

The Income Taxes topic of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2014 to 2017, the General Partner has determined that no reserves for uncertain tax positions were required.

 

2. INVESTORS IN MILLBURN MULTI-MARKETS TRADING L.P.

 

The Partnership and the Cayman Feeder invest substantially all of their assets in the Master Fund. At September 30, 2017 and December 31, 2016, the respective ownership percentages of the Master Fund are detailed below. The remaining interests are held by direct investors in the Master Fund.

 

   September 30,  December 31,
   2017  2016
 Partnership   36.51%   74.91%
 Cayman Feeder   54.17%   6.68%
           
 Total   90.68%   81.59%

 

The capital withdrawals payable at September 30, 2017 and December 31, 2016 were $2,580,067 and $6,223,896, respectively, as detailed below.

 

   September 30,  December 31,
   2017  2016
 Direct investors (1)  $   $3,294,748 
 Partnerships   2,480,864    2,876,148 
 Cayman Feeder   99,204    53,000 
           
 Total  $2,580,068   $6,223,896 

 

(1) Includes General Partner’s profit share of $2,994,748 at December 31, 2016.

 

21 

 

The Master Fund bears expenses, including, but not limited to, periodic legal, accounting and filing fees, up to an amount equal to 1/4 of 1% per annum of average net assets of the Master Fund (the “Expense Cap”). Amounts subject to the Expense Cap include expenses incurred at the Master Fund and Cayman Feeder level and the Administration Fee due to the General Partner, as general partner of the Master Fund, prior to January 1, 2017. The General Partner bears any excess over such amounts.

 

3. FAIR VALUE

 

The Fair Value Measurements and Disclosures topic of the Codification defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The three levels of the fair value hierarchy are described below:

 

Level 1:  Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2:  Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

 

Level 3:  Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

In determining fair value, the Master Fund separates its investments into two categories: cash instruments and derivative contracts.

 

Cash Instruments. The Master Fund’s cash instruments are generally classified within Level 1 of the fair value hierarchy because they are typically valued using quoted market prices. The types of instruments valued based on quoted market prices in active markets include U.S. government obligations. The General Partner does not adjust the quoted price for such instruments, even in situations where the Master Fund holds a large position and a sale could reasonably impact the quoted price.

 

Derivative Contracts. Derivative contracts can be exchange-traded or over-the-counter (“OTC”). Exchange-traded futures contracts are valued based on quoted closing settlement prices and typically fall within Level 1 of the fair value hierarchy.

 

Spot currency contracts are valued based on current market prices (“Spot Price”). Forward currency contracts are valued based on pricing models that consider the Spot Price plus the financing cost or benefit (“Forward Point”). Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Master Fund may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of months from the date the forward currency contract is being valued to its maturity date (“Months to Maturity”), then identifying the forward currency contracts for the two forward months that are closest to the Months to Maturity (“Forward Month Contracts”). Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.

 

Investment Company Status: The Partnership adopted Accounting Standard Update (“ASU”) 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements” and based on the General Partner’s assessment, the Partnership has been deemed to be an investment company since inception. Accordingly, the Partnership follows the investment company accounting and reporting guidance of Topic 946 and reflects its investments at fair value with unrealized gains and losses resulting from changes in fair value reflected in the Statements of Income and Expenses and Changes in Partners’ Capital.

 

During the three and nine months ended September 30, 2017 and 2016, there were no transfers of assets or liabilities between Level 1 and Level 2. The following tables represent the Master Fund’s investments by hierarchical level as of September 30, 2017 and December 31, 2016 in valuing the Master Fund’s investments at fair value. At September 30, 2017 and December 31, 2016, the Master Fund had no assets or liabilities in Level 3.

 

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Financial assets and liabilities at fair value as of September 30, 2017 

 

   Level 1   Level 2   Total 
             
U.S. Treasury notes (1)  $462,156,800   $   $462,156,800 
                
Short-Term Money Market Fund*   23,906,217        23,906,217 
Exchange-traded futures contracts               
 Energies   (63,465)       (63,465)
 Grains   2,360,148        2,360,148 
 Interest rates   (5,641,048)       (5,641,048)
 Livestock   (221,420)       (221,420)
 Metals   (1,706,948)       (1,706,948)
 Softs   213,950        213,950 
 Stock indices   7,717,117        7,717,117 
                
Total exchange-traded futures contracts   2,658,334        2,658,334 
                
Over-the-counter forward currency contracts       (5,854,364)   (5,854,364)
                
Total futures and forward currency contracts (2)   2,658,334    (5,854,364)   (3,196,030)
                
Total financial assets and liabilities at fair value  $488,721,351   $(5,854,364)  $482,866,987 
                
Per line item in Statements of Financial Condition               
(1)               
 Investments in U.S. Treasury notes held in equity trading accounts as collateral            $105,651,347 
 Investments in U.S. Treasury notes held in custody             356,505,453 
 Total investments in U.S. Treasury notes            $462,156,800 
                
(2)               
 Net unrealized appreciation on open futures and forward currency contracts            $2,658,334 
 Net unrealized depreciation on open futures and forward currency contracts             (5,854,364)
 Total net unrealized appreciation on open futures and forward currency contracts            $(3,196,030)

 

* The short-term money market fund is included in Cash and Cash Equivalents on the Statements of Financial Condition.

 

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Financial assets and liabilities at fair value as of December 31, 2016

 

   Level 1   Level 2   Total 
             
 U.S. Treasury notes (1)  $206,869,651   $   $206,869,651 
                
 Exchange-traded futures contracts               
 Energies   40,365        40,365 
 Grains   48,905        48,905 
 Interest rates   2,193,745        2,193,745 
 Livestock   2,280        2,280 
 Metals   265,736        265,736 
 Softs   (34,774)       (34,774)
 Stock indices   892,115        892,115 
                
 Total exchange-traded futures contracts   3,408,372        3,408,372 
                
 Over-the-counter forward currency contracts       1,746,958    1,746,958 
                
 Total futures and forward currency contracts (2)   3,408,372    1,746,958    5,155,330 
                
 Total financial assets and liabilities at fair value  $210,278,023   $1,746,958   $212,024,981 
                
 Per line item in Statements of Financial Condition               
(1)               
 Investments in U.S. Treasury notes held in equity trading accounts as collateral            $27,428,997 
 Investments in U.S. Treasury notes held in custody             179,440,654 
 Total investments in U.S. Treasury notes            $206,869,651 
                
(2)               
 Net unrealized appreciation on open futures and forward currency contracts            $5,155,330 
 Net unrealized depreciation on open futures and forward currency contracts              
 Total unrealized appreciation on open futures and forward currency contracts            $5,155,330 

 

4. DERIVATIVE INSTRUMENTS

 

The Derivatives and Hedging topic of the Codification requires qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.

 

The Master Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Master Fund’s open positions and the liquidity of the markets in which it trades.

 

The Master Fund engages in the speculative trading of futures and forward contracts on interest rates, grains, softs, currencies, metals, energies, livestock and stock indices. The following were the primary trading risk exposures of the Master Fund at September 30, 2017 by market sector:

 

Agricultural (grains, livestock and softs) – The Master Fund’s primary exposure is to agricultural price movements, which are often directly affected by severe or unexpected weather conditions, as well as supply and demand factors.

 

Currencies – Exchange rate risk is a principal market exposure of the Master Fund. The Master Fund’s currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. The fluctuations are influenced by interest rate changes, as well as political and general economic conditions. The Master Fund trades in a large number of currencies, including cross-rates—e.g., positions between two currencies other than the U.S. dollar.

 

Energies – The Master Fund’s primary energy market exposure is to gas and oil price movements often resulting from political developments in the oil producing countries and economic conditions worldwide. Energy prices are volatile and substantial profits and losses have been and are expected to continue to be experienced in this sector.

 

Interest rates – Interest rate movements directly affect the price of the sovereign bond futures positions held by the Master Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country, as well as relative interest rate movements between countries may materially impact the Master Fund’s profitability. The Master Fund’s primary interest rate exposure is to interest rate fluctuations in countries or regions including Australia, Canada, Japan, Switzerland, the United Kingdom, the U.S. and the Eurozone. However, the Master Fund also may take positions in futures contracts on the government debt of other nations. The General Partner anticipates that interest rates in these industrialized countries or areas, both long-term and short-term, will remain the primary interest rate market exposure of the Master Fund for the foreseeable future.

 

24 

 

Metals – The Master Fund’s metals market exposure is to fluctuations in the price of aluminum, copper, gold, lead, nickel, platinum, silver, tin and zinc.

 

Stock indices – The Master Fund’s equity exposure, through stock index futures, is to equity price risk in the major industrialized countries, as well as other countries.

 

The Derivatives and Hedging topic of the Codification requires entities to recognize in the Statements of Financial Condition all derivative contracts as assets or liabilities. Fair values of futures and forward currency contracts in an asset position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized appreciation on open futures and forward currency contracts.” Fair values of futures and forward currency contracts in a liability position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized depreciation on open futures and forward currency contracts.” The Master Fund’s policy regarding fair value measurement is discussed in the Fair Value and Disclosures note, contained herein.

 

Since the derivatives held or sold by the Master Fund are for speculative trading purposes, the derivative instruments are not designated as hedging instruments under the provisions of the Derivatives and Hedging guidance. Accordingly, all realized gains and losses, as well as any change in net unrealized gains or losses on open positions from the preceding period, are recognized as part of the Master Fund’s trading gains and losses in the Statements of Operations.

 

The following tables present the fair value of open futures and forward currency contracts, held long or sold short, at September 30, 2017 and December 31, 2016. Fair value is presented on a gross basis even though the contracts are subject to master netting agreements and qualify for net presentation in the Master Fund’s Statements of Financial Condition.

 

Fair value of futures and forward currency contracts at September 30, 2017

 

                     Net 
 Unrealized 
 Gain (Loss) 
     Fair Value - Long Positions     Fair Value - Short Positions     on Open 
 Sector     Gains     Losses     Gains     Losses     Positions 
 Futures contracts:                               
 Energies     $   1,191,542    $   (313,242)    $   67,239    $   (1,009,004)    $   (63,465)
 Grains               2,945,967      (585,819)      2,360,148
 Interest rates       456,685      (6,202,424)      135,891      (31,200)      (5,641,048)
 Livestock               1,080      (222,500)      (221,420)
 Metals       1,116,254      (2,282,374)      1,569,907      (2,110,735)      (1,706,948)
 Softs           (31,163)      385,812      (140,699)      213,950
 Stock indices       7,482,968      (263,767)      566,663      (68,747)      7,717,117
 Total futures contracts      10,247,449      (9,092,970)      5,672,559      (4,168,704)      2,658,334
                               
 Forward currency contracts      1,674,150      (9,862,519)     4,039,404      (1,705,399)      (5,854,364)
                               
 Total futures and forward currency contracts     $  11,921,599    $   (18,955,489)    $  9,711,963    $   (5,874,103)    $   (3,196,030)

 

 

25 

 

Fair value of futures and forward currency contracts at December 31, 2016

 

 

              

 Net 

 Unrealized  

 Gain (Loss) 

    Fair Value - Long Positions    Fair Value - Short Positions     on Open  
 Sector    Gains      Losses      Gains      Losses      Positions  
Futures contracts:                    
 Energies  $125,805   $(10,214)  $23,840   $(99,066)  $40,365 
 Grains       (2,980)   122,923    (71,038)   48,905 
 Interest rates   2,658,089    (432,542)   104    (31,906)   2,193,745 
 Livestock   5,130    (2,850)           2,280 
 Metals   750,102    (772,637)   545,558    (257,287)   265,736 
 Softs   547    (87,991)   156,789    (104,119)   (34,774)
 Stock indices   1,876,503    (665,161)   22,049    (341,276)   892,115 
 Total futures contracts   5,416,176    (1,974,375)   871,263    (904,692)   3,408,372 
                          
 Forward currency contracts   476,460    (1,260,906)   3,059,242    (527,838)   1,746,958 
                          
 Total futures and forward currency contracts  $5,892,636   $(3,235,281)  $3,930,505   $(1,432,530)  $5,155,330 

  

The effect of trading futures and forward currency contracts is represented on the Master Fund’s Statements of Operations for the three and nine months ended September 30, 2017 and 2016 as “Net realized gains (losses) on closed positions: Futures and forward currency contracts” and “Net change in unrealized: Futures and forward currency contracts.” These trading gains and losses are detailed below.

 

Trading gains (losses) of futures and forward currency contracts for the three and nine months ended September 30, 2017 and 2016

 

   Three months   Three months   Nine months   Nine months 
   ended:   ended:   ended:   ended: 
   September 30,   September 30,   September 30,   September 30, 
Sector  2017   2016   2017   2016 
 Futures contracts:                    
 Energies  $(1,344,515)  $(3,614,218)  $(10,087,547)  $(3,798,915)
 Grains   581,715    467,090    (4,689,545)   3,731,258 
 Interest rates   (610,263)   2,303,538    (8,238,107)   25,650,395 
 Livestock   259,720    664,530    (273,000)   672,790 
 Metals   (788,041)   (283,569)   (516,224)   (1,852,189)
 Softs   (325,826)   (227,230)   2,093,443    (1,071,043)
 Stock indices   22,123,955    4,159,234    46,818,237    8,424,324 
 Total futures contracts   19,896,745    3,469,375    25,107,257    31,756,620 
                     
 Forward currency contracts   (779,253)   495,791    (12,351,503)   3,106,230 
                     
 Total futures and forward currency contracts  $19,117,492   $3,965,166   $12,755,754   $34,862,850 

 

For the three months ended September 30, 2017 and 2016, the monthly average number of future contracts bought and sold and the monthly average notional value of forward currency contracts traded are detailed below:

 

    2017   2016 
          
 Average bought     39,823    12,159 
 Average sold     40,637    11,463 
 Average notional    $4,043,000,000   $1,223,000,000 
             

 

 

26 

 

The customer agreements between the Master Fund, the futures clearing brokers including, Deutsche Bank Securities Inc. (a wholly owned subsidiary of Deutsche Bank AG) and SG Americas Securities, LLC, as well as the FX prime broker, Deutsche Bank AG, and the swap dealer, Morgan Stanley & Co., LLC, give the Master Fund the legal right to net unrealized gains and losses on open futures and foreign currency contracts. The Master Fund netted, for financial reporting purposes, the unrealized gains and losses on open futures and forward currency contracts on the Statements of Financial Condition as the criteria under ASC 210-20, “Balance Sheet,” were met.

 

The following table represents gross amounts of assets or liabilities which qualify for offset as presented per the Statement of Financial Condition as of September 30, 2017 and December 31, 2016.

 

Offsetting of derivative assets and liabilities at September 30, 2017        
       Gross amounts   Net amounts of 
       offset in the   assets presented in 
   Gross amounts of   Statement of   the Statement of 
Assets  recognized assets   Financial Condition   Financial Condition 
                
 Futures contracts               
 Counterparty C  $6,085,416   $(5,118,059)  $967,357 
 Counterparty I   9,834,592    (8,143,615)   1,690,977 
 Total futures contracts   15,920,008    (13,261,674)   2,658,334 
                
 Total assets  $15,920,008   $(13,261,674)  $2,658,334 

 

       Gross amounts   Net amounts of 
       offset in the   liabilities presented in 
   Gross amounts of   Statement of   the Statement of 
Liabilities  recognized liabilities   Financial Condition   Financial Condition