Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

---

 

FORM 10-Q

 

---

 

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

 

For the quarterly period ended March 31, 2018

 

OR

 

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

 

For the transition period from ________ to ___________

 

Commission File Number:  000-53815

 

---

 

ALTEGRIS QIM FUTURES FUND, L.P.

(Exact name of registrant as specified in its charter)

 

---

 

DELAWARE		27-0473854
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

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  ý No  o

 

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  ý No  o

 

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  o		Accelerated filer  o			Non-accelerated filer  ý			Smaller reporting company  o
Emerging growth company  o

 

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. o

 

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

 

 

 

 

 

TABLE OF CONTENTS

 

		Page
PART I – FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Statements of Financial Condition	3
	Condensed Schedules of Investments	4
	Statements of Income (Loss)	8
	Statements of Changes in Partners’ Capital (Net Asset Value)	9
	Notes to Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II – OTHER INFORMATION		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosure	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
Signatures		31
Rule 13a–14(a)/15d–14(a) Certifications
Section 1350 Certifications

 

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1:   Financial Statements.

 

ALTEGRIS QIM FUTURES FUND, L.P.

STATEMENTS OF FINANCIAL CONDITION

MARCH 31, 2018 (Unaudited) and DECEMBER 31, 2017 (Audited)

_______________

           

 

		2018				2017
ASSETS
Equity in commodity broker account:
Cash		$	3,020,529			$	921,512
Restricted cash			731,458				859,249
Restricted foreign currency (cost - $550,372 and $693,564)			547,003				688,780
Net unrealized gain on open futures contracts			–				309,752
Settled variation margin			–				106,499
			4,298,990				2,885,792
Cash			1,689,039				6,312,140
Investment securities at fair value (cost - $23,479,118 and $23,396,557)			23,478,614				23,396,654
Interest receivable			2,125				1,157
Total assets		$	29,468,768			$	32,595,743
LIABILITIES
Equity in commodity broker account:
Foreign currency due to broker (proceeds - $539,727 and $691,361)		$	536,423			$	686,592
Net unrealized loss on open futures contracts			51,723				–
Settled variation margin			209,468				–
			797,614				686,592
Redemptions payable			91,995				203,427
Incentive fees payable			–				68,985
Subscriptions received in advance			65,000				57,000
Service fees payable			39,242				42,515
Management fee payable			28,273				31,503
Brokerage commissions payable			23,778				17,374
Administrative fee payable			7,081				7,902
Other liabilities			171,479				130,243
Total liabilities			1,224,462				1,245,541
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner			865				942
Limited Partners			28,243,441				31,349,260
Total partners' capital (Net Asset Value)			28,244,306				31,350,202
Total liabilities and partners' capital		$	29,468,768			$	32,595,743

 

 

See accompanying notes.

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS

MARCH 31, 2018 (Unaudited)

_______________

   

 

INVESTMENT SECURITIES

 

Face Value				Maturity Date		Description		Fair Value				% of Partners' Capital
Fixed Income Investments
U.S. Government Agency Bonds and Notes
$	3,000,000			4/6/2018		Federal Home Loan Bank Disc Note, 1.08%*		$	2,999,448			10.62%
	3,000,000			4/18/2018		Federal Home Loan Bank Disc Note, 1.48%*			2,997,786			10.61%
	5,422,000			4/2/2018		Federal Home Loan Mortgage Corp Disc Note, 3.00%*			5,422,000			19.20%
Total U.S. Government Agency Bonds and Notes (cost - $11,418,768)									11,419,234			40.43%
Corporate Notes
$	900,000			4/2/2018		Alphabet, Inc., 2.28%*			899,829			3.19%
	705,000			4/23/2018		Apple Inc., 1.88%*			704,112			2.49%
	300,000			4/2/2018		Banco del Estado de Chile, 2.24%*			299,986			1.06%
	705,000			4/20/2018		Banco del Estado de Chile (New York), 1.86%			705,014			2.50%
	705,000			4/20/2018		Bank of Montreal, 1.89%*			704,222			2.50%
	705,000			4/20/2018		Canadian Imperial Holdings, Inc., 1.95%*			704,198			2.49%
	450,000			4/2/2018		Cedar Springs Capital Company LLC, 2.41%*			449,978			1.59%
	1,000,000			4/2/2018		Concord Minutemen Capital Company LLC, 2.27%*			999,953			3.54%
	235,000			4/19/2018		DCAT, LLC, 1.98%*			234,742			0.83%
	705,000			4/19/2018		Exxon Mobil Corp Disc Note, 1.89%*			704,260			2.49%
	470,000			4/26/2018		Honeywell International, Inc., 1.95%*			469,311			1.66%
	470,000			4/3/2018		IBM Credit LLC, 2.18%*			469,886			1.67%
	655,000			4/5/2018		MetLife Short Term Funding LLC, 2.00%*			654,782			2.32%
	703,000			4/4/2018		Sumitomo Mitsui Banking Corporation, 1.69%			702,996			2.49%
	468,000			4/4/2018		Sumitomo Mitsui Trust Bank Ltd., 1.69%			467,997			1.66%
	469,000			4/19/2018		The Chiba Bank Ltd., 2.00%			469,013			1.66%
	1,000,000			4/2/2018		The Home Depot, Inc., 2.31%*			999,954			3.54%
	470,000			4/13/2018		The Walt Disney Co., 1.91%*			469,723			1.66%
	950,000			4/10/2018		Wal-Mart Stores, Inc., 1.98%*			949,424			3.36%
Total Corporate Notes (cost - $12,060,350)									12,059,380			42.70%
Total Investment Securities (cost - $23,479,118)								$	23,478,614			83.13%

 

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

 

See accompanying notes.

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (continued)

MARCH 31, 2018 (Unaudited)

_______________

   

 

		Range of Expiration Dates		Number of Contracts				Fair Value*				% of Partners' Capital
Long Futures Contracts:
Currencies		Jun 18			16			$	(6,930	)			(0.02)%
Energy		Apr 18			25				21,717				0.08%
Interest Rates		Jun 18			14				25,979				0.09%
Stock Indices		Apr 18 - Jun 18			126				121,080				0.43%
Total Long Futures Contracts					181				161,846				0.58%
Short Futures Contracts:
Currencies		Jun 18			10				3,078				0.01%
Energy		Apr 18			4				(2,169	)			(0.01)%
Interest Rates		Jun 18			113				(163,614	)			(0.58)%
Metals		May 18 - Jun 18			22				8,128				0.03%
Stock Indices		Jun 18			10				35,122				0.12%
Treasury Rates		Jun 18			316				(303,582	)			(1.07)%
Total Short Futures Contracts					475				(423,037	)			(1.50)%
Total Futures Contracts								$	(261,191	)			(0.92)%

 

 

*Futures include settled variation margin.

 

See accompanying notes.

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (continued)

DECEMBER 31, 2017 (Audited)

_______________

                   

INVESTMENT SECURITIES

 

Face Value				Maturity Date		Description		Fair Value				% of Partners' Capital
Fixed Income Investments
U.S. Government Agency Bonds and Notes
$	12,932,000			1/2/2018		Federal Farm Credit Bank Disc Note, 0.00%		$	12,931,623			41.25%
	1,500,000			1/2/2018		Federal Home Loan Bank Disc Note, 0.00%			1,500,000			4.78%
	1,000,000			1/8/2018		Federal Home Loan Bank Disc Note, 0.99%*			999,785			3.19%
Total U.S. Government Agency Bonds and Notes (cost - $15,431,376)									15,431,408			49.22%
Corporate Notes
$	700,000			1/11/2018		American Honda Finance Corporation, 1.43%			699,637			2.23%
	701,000			1/26/2018		Banco del Estado de Chile, 1.55%			701,000			2.24%
	700,000			1/26/2018		Bank of Montreal, 1.50%*			699,271			2.23%
	701,000			1/26/2018		Canadian Imperial Holdings, Inc., 1.48%			700,279			2.23%
	700,000			1/12/2018		The Coca-Cola Company, 1.32%			699,608			2.23%
	235,000			10/1/2018		DCAT, LLC, 1.68%*			234,868			0.75%
	700,000			1/12/2018		MetLife Short Term Funding LLC, 1.41%			699,601			2.23%
	465,000			1/22/2018		National Rural Utilities Cooperation, 1.62%			464,574			1.48%
	700,000			9/1/2018		PACCAR Financial Corporation, 1.48%*			699,682			2.23%
	700,000			1/5/2018		Sumitomo Mitsui Banking Corporation, 1.37%			699,984			2.23%
	467,000			1/5/2018		Sumitomo Mitsui Trust Bank Ltd., 1.37%			466,989			1.50%
	250,000			1/8/2018		3M Company, 1.49%			249,902			0.80%
	950,000			1/2/2018		Wal-Mart Stores, Inc., 1.24%			949,851			3.03%
Total Corporate Notes (cost - $7,965,181)									7,965,246			25.41%
Total Investment Securities (cost - $23,396,557)								$	23,396,654			74.63%

 

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

 

See accompanying notes.

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (continued)

DECEMBER 31, 2017 (Audited)

_______________

                   

 

		Range of Expiration Dates		Number of Contracts				Fair Value*				% of Partners' Capital
Long Futures Contracts:
Currencies		Mar 18			81			$	96,610			0.31%
Interest Rates		Mar 18			36				(55,415	)		(0.18)%
Metals		Feb 18 - Mar 18			83				316,177			1.01%
Stock Indices		Jan 18 - Mar 18			96				(5,279	)		(0.02)%
Treasury Rates		Mar 18			309				68,158			0.22%
Total Long Futures Contracts					605				420,251			1.34%
Short Futures Contracts:
Currencies		Mar 18			27				(13,379	)		(0.04)%
Energy		Jan 18			33				(44,184	)		(0.14)%
Interest Rates		Mar 18			182				22,773			0.07%
Stock Indices		Mar 18			45				30,790			0.10%
Total Short Futures Contracts					287				(4,000	)		(0.01)%
Total Futures Contracts								$	416,251			1.33%

 

*Futures include settled variation margin.

 

See accompanying notes.

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

STATEMENTS OF INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017 (Unaudited)

_______________

           

 

		2018				2017
TRADING GAIN (LOSS)
Gain (loss) on trading of futures
Net realized		$	(1,527,078	)		$	2,742,953
Net change in unrealized			(677,442	)			(390,583	)
Brokerage Commissions			(112,989	)			(117,119	)
Net gain (loss) from trading futures			(2,317,509	)			2,235,251
Gain (loss) on trading of securities
Net realized			–				13,139
Net change in unrealized			(601	)			(559	)
Net gain (loss) from trading securities			(601	)			12,580
Gain (loss) on trading of foreign currency
Net realized			(6,409	)			(3,302	)
Net change in unrealized			(50	)			919
Net gain (loss) from trading foreign currency			(6,459	)			(2,383	)
Total trading gain (loss)			(2,324,569	)			2,245,448
NET INVESTMENT INCOME (LOSS)
Income
Interest income			95,267				25,259
Expenses
Incentive fees			–				634,174
Service fees			97,971				106,926
Management fee			91,093				94,943
Professional fees			55,218				53,702
Administrative fee			22,835				24,013
Out of pocket fees			6,600				7,500
Interest expense			5,089				4,518
Other expenses			4,525				4,168
Total expenses			283,331				929,944
Net investment income (loss)			(188,064	)			(904,685	)
NET INCOME (LOSS)		$	(2,512,633	)		$	1,340,763

 

 

See accompanying notes.

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

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

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017 (Unaudited)

_______________

                             

  

						Limited Partners
		Total				Class A				Class B				Institutional Interests				General Partner
Balances at December 31, 2016		$	29,444,464			$	20,121,489			$	7,648,087			$	1,673,974			$	914
Capital additions			1,734,032				584,032				225,000				925,000				–
Capital withdrawals			(561,780	)			(375,834	)			(185,946	)			–				–
From operations:
Net investment gain (loss)			(904,685	)			(649,790	)			(206,882	)			(47,984	)			(29	)
Net realized gain (loss) from investments (net of brokerage commissions)			2,635,671				1,773,528				678,376				183,687				80
Net change in unrealized gain (loss) from investments			(390,223	)			(249,744	)			(98,208	)			(42,260	)			(11	)
Net income (loss)			1,340,763				873,994				373,286				93,443				40
Balances at March 31, 2017		$	31,957,479			$	21,203,681			$	8,060,427			$	2,692,417			$	954
Balances at December 31, 2017		$	31,350,202			$	21,086,218			$	7,726,323			$	2,536,719			$	942
Capital additions			315,679				196,441				119,238				–				–
Capital withdrawals			(908,942	)			(575,385	)			(333,557	)			–				–
From operations:
Net investment gain (loss)			(188,064	)			(161,994	)			(23,411	)			(2,652	)			(7	)
Net realized gain (loss) from investments (net of brokerage commissions)			(1,646,476	)			(1,110,378	)			(403,600	)			(132,449	)			(49	)
Net change in unrealized gain (loss) from investments			(678,093	)			(457,080	)			(165,763	)			(55,229	)			(21	)
Net income (loss)			(2,512,633	)			(1,729,452	)			(592,774	)			(190,330	)			(77	)
Balances at March 31, 2018		$	28,244,306			$	18,977,822			$	6,919,230			$	2,346,389			$	865

 

 

See accompanying notes.

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS

_______________

 

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. (the "General Partner"). The General Partner has overall responsibility for the management, operation and administration of the Partnership, including the selection of its commodity trading adviser. The Partnership’s trading activities are conducted pursuant to an advisory contract with Quantitative Investment Management LLC (the “Advisor”). The Partnership speculatively trades commodity futures contracts, and may trade options on futures contracts, forward currency 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, 2018 and December 31, 2017, and reported amounts of income and expenses for the three months ended March 31, 2018 and 2017, 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.

 

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.

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

C.	Fair Value (continued)

 

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.

 

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.

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

C.	Fair Value (continued)

 

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.

 

When available, the fair value of U.S. government agency bonds and notes is 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 that 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 generally categorized in Level I or Level 2 of the fair value hierarchy. As of March 31, 2018 and December 31, 2017, 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. U.S. treasury obligations are categorized in Level 2 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, bond, 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, 2018 and December 31, 2017, none of the Partnership’s holdings in corporate notes were fair valued using valuation models.

 

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 period ended March 31, 2018 and the year ended December 31, 2017.

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

C.	Fair Value (continued)

 

The following table presents information about the Partnership’s assets and liabilities measured at fair value as of March 31, 2018 and December 31, 2017:

 

March 31, 2018		Level 1				Level 2				Level 3				Balance as of March 31, 2018
Assets
Futures contracts (1)		$	221,735			$	–			$	–			$	221,735
U.S. Government agency bonds and notes			–				11,419,234				–				11,419,234
Corporate notes			–				12,059,380				–				12,059,380
Total Assets		$	221,735			$	23,478,614			$	–			$	23,700,349
Liabilities
Futures contracts (1)		$	(482,926	)		$	–			$	–			$	(482,926	)

 

December 31, 2017		Level 1				Level 2				Level 3				Balance as of December 31, 2017
Assets
Futures contracts (1)		$	555,830			$	–			$	–			$	555,830
U.S. Government agency bonds and notes			–				15,431,408				–				15,431,408
Corporate notes			–				7,965,246				–				7,965,246
Total Assets		$	555,830			$	23,396,654			$	–			$	23,952,484
Liabilities
Futures contracts (1)		$	(139,579	)		$	–			$	–			$	(139,579	)

 

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

 

The Partnership’s policy is to recognize any transfers between Level 1 and Level 2 assets as of the Partnership’s fiscal year-end.

 

For the period ended March 31, 2018 and the year ended December 31, 2017, there were no transfers between Level 1 and Level 2 assets and liabilities. For the period ended March 31, 2018 and the year ended December 31, 2017, there were no Level 3 securities.

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

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 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, 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 gain (loss) on other assets and other liabilities denominated in foreign currency 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.

 

J.P. Morgan Chase Bank, N.A. (the “Custodian”) is the Partnership’s custodian. SG Americas Securities, LLC (the “Clearing Broker”) is the Partnership’s commodity broker. A portion of the Partnership’s assets are held as initial margin or option premiums (in cash or Treasury securities) in the Partnership’s brokerage accounts at the Clearing Broker. The Clearing Broker may convert the Partnership’s cash in U.S. dollar to foreign currency to facilitate the Partnership’s commodity trading activities. At times, the Partnership may carry foreign cash on loan with the Clearing Broker. Any net foreign currency on loan will be recognized in Foreign Currency Due to Broker on the Statements of Financial Condition. The Partnership’s Clearing Broker holds margin balances in a single currency, in which all margin requirements can be satisfied in U.S. dollars. Foreign currency balances can also be used to satisfy margin requirements. As of March 31, 2018 and December 31, 2017, the Partnership’s restricted cash balance on the Statements of Financial Condition of $731,458 and $859,249, respectively, represents the collateral pledged by the Partnership to satisfy the Clearing Broker’s margin requirements in US Dollars. As of March 31, 2018 and December 31, 2017, the Partnership’s restricted foreign currency balance on the Statements of Financial Condition of $547,003 and $688,780, respectively, represents the collateral pledged by the Partnership to satisfy the Clearing Broker’s margin requirements in foreign currency. The Partnership’s assets not deposited at the Clearing Broker are deposited with either the Custodian or held in bank cash accounts at Northern Trust Company (and used to pay Partnership operating expenses).  For the Partnership’s cash deposited at the Custodian, the Partnership receives cash management services from J.P. Morgan Investment Management Inc. (“JPMIM”).

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

E.	Futures Contracts

 

The Partnership engages 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 Statements 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.

 

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, 2018 and December 31, 2017 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

 

The Partnership maintains a custody account with JPMorgan Chase Bank, N.A. 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.

 

Both restricted cash and restricted foreign currency are held as margin collateral deposits for futures transactions.

 

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. Offering costs are included in other expenses on the Statements of Income (Loss).

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

I.	Income Taxes

 

The Partnership is treated as a partnership for U.S. federal income tax purposes. As such, the partners are individually liable for their own distributable share of taxable income or loss. No provision has been made in the accompanying financial statements for U.S., federal, state, or local income taxes.

 

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 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, 2018 or December 31, 2017. 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 2014. 

 

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 and for the three months ended March 31, 2018 or for the year ended December 31, 2017.

 

J.	Reclassifications

 

Certain amounts in the 2017 financial statements were reclassified to conform to the 2018 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 Limited Partners (each, a “Limited Partner” and collectively the “Limited 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 (the “Agreement”), as may be amended and restated from time to time.  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.

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 2 - PARTNERS’ CAPITAL (CONTINUED)

 

B.	Subscriptions, Distributions and Redemptions

 

No Limited Partner of the Partnership 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.

 

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, 2018 and 2017.

 

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 net asset value apportioned to each Partner’s capital account at the beginning of the month, before deduction of any accrued incentive fees related to the current quarter (the “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, 2018 and 2017, there were no Special Limited Partners.

 

Total management fees earned by the General Partner for the three months ended March 31, 2018 and 2017 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, 2018 and 2017, administrative fees for Class A Interests were $16,718 and $17,364, respectively, and administrative fees for Class B Interests were $6,117 and $6,649, respectively.

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)

 

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

 

Altegris Investments, L.L.C. (“Altegris Investments”), an affiliate of the General Partner, is registered as a broker-dealer with the SEC and a Delaware limited liability company. 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. 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 its introducing broker, at a minimum, brokerage charges at a 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, 2018 and December 31, 2017, respectively, the Partnership had charges for brokerage-related services payable to Altegris Clearing Solutions of $19,842 and $12,021, respectively, and service fees payable to Altegris Investments of $4,383 and $5,217, respectively. These amounts are included in brokerage commissions payable and service fees payable on the Statements of Financial Condition, respectively. The amounts shown on the Statements of Financial Condition include fees payable to non-related parties. The following tables show the fees paid to Altegris Investments and Altegris Clearing Solutions for the three months ended March 31, 2018 and 2017, respectively:

 

		Three months ended March 31, 2018				Three months ended March 31, 2017
Altegris Clearing Solutions - Brokerage Commission fees		$	70,805			$	36,044
Altegris Investments- Service fees			14,083				17,123
Total		$	84,888			$	53,167

 

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 pays the Advisor a quarterly incentive fee of 30% of the trading profits.  However, the quarterly incentive fee is payable only on cumulative profits achieved from commodity trading (as defined in the Agreement), calculated separately for each partner’s interest. The incentive fee is accrued on a monthly basis and paid quarterly. Incentive fees are reflected in the Statements of Income (Loss).

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 5 - SERVICE FEES

 

As compensation for the continuing services of the selling agents to the Class A Limited Partners, Class A Interests pay the selling agents an ongoing monthly payment of 0.166% (2% annually) of the net asset value of interests sold by the agents that are outstanding at month-end. As compensation for the continuing services of the selling agents to the Limited Partners holding Institutional Interests, the selling agents may elect the Institutional Interests to pay the selling agents an ongoing monthly payment of 0.0417% (0.50% annually) of the net asset value of Institutional Interests sold by the agents that are outstanding at month-end. For the three months ended March 31, 2018 and 2017, service fees for Class A Interests were $97,971 and $106,926, respectively. There were no service fees for Institutional Interests for the three months ended March 31, 2018 and 2017.

 

NOTE 6 - BROKERAGE COMMISSIONS AND CHARGES

 

The Partnership is subject to monthly brokerage charges equal to the greater of: (A) actual commissions and expenses paid to the Clearing Broker by the Partnership; or (B) an amount equal to 0.125% of the management fee net asset value of all Limited Partners’ month-end capital account balances (1.50% annually) (the “Minimum Amount”).

 

If actual commissions and expenses paid to the Clearing Broker in a month (in (A) above) are less than the Minimum Amount, the Partnership will pay to the Introducing Broker the difference as payment for brokerage-related services, including, but not limited to, monitoring trade, execution, clearing, custodial and distribution services provided to the Partnership. If actual commissions and expenses paid to the Clearing Broker in a month (in (A) above) are greater than the Minimum Amount, the Partnership pays only the amounts described in (A) above. The Partnership’s payments of brokerage commissions to the Clearing Broker for clearing trades on its behalf, and payments to the Introducing Broker for brokerage-related services, if any, are reflected in the Statements of Income (Loss) as 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.

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

The following presents the fair value of derivative contracts as of March 31, 2018 and December 31, 2017. 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.

 

March 31, 2018

 

		Asset				Liability
Type of		Derivatives				Derivatives				Net
Futured Contracts		Fair Value				Fair Value				Fair Value
Futures Contracts
Currencies		$	3,078			$	(6,930	)		$	(3,852	)
Energy			21,716				(2,169	)			19,547
Interest Rates			27,107				(164,742	)			(137,635	)
Metals			8,415				(286	)			8,129
Stock Indices			161,419				(5,218	)			156,201
Treasury Rates			–				(303,581	)			(303,581	)
		$	221,735			$	(482,926	)		$	(261,191	)

 

December 31, 2017

 

		Asset				Liability
Type of		Derivatives				Derivatives				Net
Futured Contracts		Fair Value				Fair Value				Fair Value
Futures Contracts
Currencies		$	96,610			$	(13,379	)		$	83,231
Energy			–				(44,184	)			(44,184	)
Interest Rates			24,531				(57,173	)			(32,642	)
Metals			316,177				–				316,177
Stock Indices			50,354				(24,843	)			25,511
Treasury Rates			68,158				–				68,158
		$	555,830			$	(139,579	)		$	416,251

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

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, 2018 and 2017.

 

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.

 

Three Months ended March 31, 2018

 

Type of						Change in
Futured Contracts		Realized				Unrealized
Futures Contracts
Currencies		$	182,124			$	(87,083	)
Energy			124,787				63,732
Interest Rates			85,345				(104,993	)
Metals			440,818				(308,049	)
Stock Indices			(2,241,255	)			130,691
Treasury Rates			(118,897	)			(371,740	)
		$	(1,527,078	)		$	(677,442	)

 

For the three months ended March 31, 2018, the number of futures contracts closed was 4,756. These closed contract amounts are representative of the Partnership’s volume of derivative activity during the period.

 

Three Months ended March 31, 2017

 

Type of						Change in
Futured Contracts		Realized				Unrealized
Futures Contracts
Currencies		$	78,506			$	39,243
Energy			(144,336	)			(142,582	)
Interest Rates			263,456				(650,154	)
Metals			202,998				7,581
Stock Indices			1,537,276				134,779
Treasury Rates			809,053				220,550
		$	2,742,953			$	(390,583	)

 

For the three months ended March 31, 2017, the number of futures contracts closed was 8,432. These closed contract amounts are representative of the Partnership’s volume of derivative activity during the period.

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

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) the Clearing Broker is directed or required by a regulatory or self-regulatory organization, (ii) the Clearing Broker determines, at its discretion, that the risk in the Partnership’s account must be reduced for protection of the Clearing Broker, (iii) upon the Partnership’s breach or failure to perform on its contractual agreements with the Clearing Broker, (iv) upon the commencement of bankruptcy, insolvency or similar proceeding for the protection of creditors against the Partnership, or (v) upon the dissolution, winding-up, liquidation or merger of the Partnership.

 

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

 

Offsetting the Financial Assets and Derivative Assets

 

As of March 31, 2018

Gross Amounts Not Offset in the Statements of Financial Condition

Description

Gross Amounts of Recognized Assets

Gross Amounts Offset in the Statements of Financial Condition

Net Amounts of Assets Presented in the Statements of Financial Condition

Financial Instruments

Cash Collateral Received (1)

Net Amount

Futures contracts

118,523

(118,523

)

–

–

–

–

 

Offsetting the Financial Liabilities and Derivative Liabilities

 

As of March 31, 2018														Gross Amounts Not Offset in the Statements of Financial Condition
Description			Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statements of Financial Condition				Net Amounts of Liabilities Presented in the Statements of Financial Condition				Financial Instruments				Cash Collateral Pledged (1)				Net Amount
Futures contracts			(170,246	)			(118,523	)			(288,769	)			–				–				(288,769	)

  

Offsetting the Financial Assets and Derivative Assets

 

As of December 31, 2017

Gross Amounts Not Offset in the Statements of Financial Condition

Description

Gross Amounts of Recognized Assets

Gross Amounts Offset in the Statements of Financial Condition

Net Amounts of Assets Presented in the Statements of Financial Condition

Financial Instruments

Cash Collateral Received (1)

Net Amount

Futures contracts

380,608

70,856

451,464

–

–

451,464

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

Offsetting the Financial Liabilities and Derivative Liabilities

 

As of December 31, 2017

Gross Amounts Not Offset in the Statements of Financial Condition

Description

Gross Amounts of Recognized Liabilities

Gross Amounts Offset in the Statements of Financial Condition

Net Amounts of Liabilities Presented in the Statements of Financial Condition

Financial Instruments

Cash Collateral Pledged (1)

Net Amount

Futures contracts

(70,856

)

70,856

–

–

–

–

 

(1) The Partnership posted additional collateral of $1,278,461 for 2018 and $1,548,029 for 2017, with the Clearing Broker. The Partnership may post collateral due to a variety of factors that may include, without limitation, initial margin or other requirements that are based on notional amounts which may exceed the fair value of the derivative contract.

  

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 and interbank market makers. 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 or interbank market makers 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.

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 10 - FINANCIAL HIGHLIGHTS

 

The following information presents the financial highlights of the Partnership for the three months ended March 31, 2018 and 2017. This information has been derived from information presented in the financial statements.

 

		Three Months ended March 31, 2018
										Institutional
		Class A				Class B				Interest
Total return for Limited Partners (3)
Total return prior to incentive fees			(8.16%	)			(7.70%	)			(7.50%	)
Incentive fees			0.00%				0.00%				0.00%
Total return after incentive fees			(8.16%	)			(7.70%	)			(7.50%	)
Ratio to average net asset value
Expenses prior to incentive fees (2)			4.51%				2.55%				1.72%
Incentive fees (3)			0.00%				0.00%				0.00%
Total expenses			4.51%				2.55%				1.72%
Net investment loss (1) (2)			(3.23%	)			(1.28%	)			(0.44%	)

 

		Three Months ended March 31, 2017
										Institutional
		Class A				Class B				Interest
Total return for Limited Partners (3)
Total return prior to incentive fees			6.42%				6.95%				7.17%
Incentive fees			(2.12%	)			(2.12%	)			(2.19%	)
Total return after incentive fees			4.30%				4.83%				4.98%
Ratio to average net asset value
Expenses prior to incentive fees (2)			4.54%				2.49%				1.73%
Incentive fees (3)			2.06%				2.05%				2.03%
Total expenses			6.60%				4.54%				3.76%
Net investment loss (1) (2)			(4.22%	)			(2.17%	)			(1.39%	)

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 10 - FINANCIAL HIGHLIGHTS (CONTINUED)

 

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.

 

 

(1)

Excludes incentive fee.

(2)

Annualized.

(3)

Not annualized.

 

NOTE 11 - SUBSEQUENT EVENTS

 

Management of the Partnership evaluated subsequent events through the date these financial statements were available to be issued, and concluded that no events subsequent to March 31, 2018 have occurred that would require recognition or disclosure, except as noted below.

 

From April 1, 2018 through May 14, 2018, the Partnership had redemptions of $1,184,926.

 

 

 

 

 

 

 

 

 

 

 

 

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 June 30, 2017 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.

 

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. In the future, the Partnership anticipates that it will enter into non-exchange-traded foreign currency contracts and be subject to the credit risk associated with counterparty non-performance.

 

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.

 

 

 

 

 

Performance Summary

 

Three Months Ended March 31, 2018

 

During the first quarter of 2018, the Partnership incurred net realized and unrealized losses of $2,324,569 from its trading activities, net of brokerage commissions of $112,989. The Partnership accrued total expenses of $283,331, including $91,093 in management fees paid to the General Partner, $0 in incentive fees, and $153,189 in service and professional fees. The Partnership earned $95,267 in interest income during the first quarter of 2018.  An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the first quarter of 2018 is set forth below.

 

First Quarter 2018. The Partnership’s trading advisor, QIM believes that numerous small inefficiencies exist in financial markets that can be exploited through the prudent use of robust analysis and predictive technologies. The trading program currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation. First quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was negative in January of 2018. Losses were driven primarily by the stock index sector, which was the worst performing sector. Losses from stock indices were somewhat offset by results from the other sectors; however the offsetting performance was insufficient in creating cumulative positive returns. Currencies were the best performing sector, closely followed by metals. Interest rate trading contributed positively to performance ahead of energies which were also positive to a lesser degree. The Partnership suffered losses for the month of February 2018. Losses were driven primarily by the stock index sector, which was significantly the worst performing sector. Currencies were the next underperforming sector detracting from returns, followed by metals which were only slightly negative. Interest rate performance was mixed, and exposures to energy contracts produced insignificant gains that were close to flat. The Partnership enjoyed positive returns for the month of March 2018. Profits were driven primarily by the stock index sector, which was the best performing sector followed by energies. Gains from stock index and energy trading were partially offset by losses in the interest rate sector, which was the worst performing sector. Currencies were mixed, and positions in the metals sector contributed minimal gains.

 

Three Months Ended March 31, 2017

 

During the first quarter of 2017, the Partnership achieved net realized and unrealized gains of $2,245,448 from its trading activities, net of brokerage commissions of $117,119.  The Partnership accrued total expenses of $929,944, including $94,943 in management fees paid to the General Partner, $634,174 in incentive fees, and $160,628 in service and professional fees.  The Partnership earned $25,259 in interest income during the first quarter of 2017. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the first quarter of 2017 is set forth below. 

 

 

 

 

First Quarter 2017. The Partnership enjoyed net positive performance for the month of January 2017, driven primarily by stock indices, with interest rates and metals contributing modestly. Energies were the worst performing sector and currencies also experienced negative return. As equity prices rebounded from a late December slump, the Partnership’s long equity positions generated strong performance early in January. The Partnership remained net long throughout most of the month as equity markets reached new highs and the Dow broke through the 20,000 level for the first time. The Partnership reversed to short and earned additional gains when markets sold off into month end. After initially sustaining losses on long interest rate positions, the Partnership went short midmonth. A hawkish speech by Federal Reserve Chair Janet Yellen on January 18th led to a selloff in interest rate futures, turning the sector positive for the month. The bulk of the energy sector’s underperformance occurred early in January when short crude oil positions took a hit on record export numbers out of Iraq, which raised concerns about the stability of OPEC’s production agreement. In February 2017, the Partnership experienced a slightly positive net performance gain, driven by gains in interest rates and currencies. The worst performing sector was stock indices, followed by metals and energies. February began with uncertainty, as short U.S. and European stock index positions suffered as markets ground higher on relatively low volatility and little news. The Partnership reversed to long midmonth, which tempered losses as stock indices continued to rise. The Partnership fared much better in the interest rate sector. Initially long U.S. Treasuries, the Partnership reversed in time to benefit from declining rates through the middle of February. These gains were partially offset by a growing long position in European interest rates. Bonds reached their monthly low on the 15th but traded higher into month end, which resulted in profits as European interest rates had become the Partnership’s largest positon. End-of-month gains in the sector were driven by the Euro-Bund. For March 2017, the Partnership again ended the month with slightly positive performance, driven by stock indices, metals and currencies, and with interests rates and energies detracting from overall performance. The Partnership initially experienced strong performance as U.S. stock indices surged to all-time highs on the first day of the month. Equity markets then edged lower on concerns of the upcoming presidential election in France and the debate over health care reform in the United States. The Partnership reduced its long positions throughout the month, going net short for a brief period before going long again ahead of a vote in Congress regarding U.S. health care. Initially trading lower on disappointment from Congress’ failure to pass health care legislation, stock indices shrugged off the news and traded higher into month end. Profits in long U.S. and European stock indices were offset in part by losses in long European interest rates. The Partnership reversed interest rate positions midmonth, racking up losses on short European positions as markets traded higher in the second half of March. To its benefit, the Partnership shifted its U.S. interest rate positions from short to long during the month, which limited losses for the sector overall.

 

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.

 

 

 

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1:  Legal Proceedings.

 

None.

 

Item 1A:  Risk Factors.

 

Not required.

 

Item 2:  Unregistered Sales of Equity Securities and Use of Proceeds.

 

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

 

(b) Not applicable.

 

(c) 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 2018:

 

Month			Amount Redeemed
January 31, 2018			$	317,007
February 28, 2018			$	499,939
March 31, 2018			$	91,995

 

Item 3:  Defaults Upon Senior Securities.

 

(a) None.

 

(b) None.

 

Item 4:  Mine Safety Disclosure.

 

Not applicable.

 

Item 5:  Other Information.

 

(a) None.

 

(b) Not applicable.

 

 

 

 

 

 

Item 6:  Exhibits.

 

The following exhibits are incorporated herein by reference from the exhibits of the same numbers and descriptions filed with the registrant’s Registration Statement on Form 10 (File No. 000-53815) filed on November 2, 2009.

 

Exhibit Number	Description of Document
3.1	Certificate of Formation of APM – QIM Futures Fund, L.P.
10.1	Agreement with Quantitative Investment Management LLC
10.2	Selling Agency Agreement between APM – QIM Futures Fund, L.P. and Altegris Investments Inc.

 

The following exhibit is incorporated herein by reference from the exhibit of the same number and description filed with the registrant’s Current Report on Form 8-K (File No. 000-53815) filed on August 5, 2010.

 

Exhibit Number	Description of Document
3.01	Amendment to the Certificate of Formation of APM – QIM Futures Fund, L.P., changing the registrant’s name to Altegris QIM Futures Fund, L.P.

 

The following exhibit is incorporated herein by reference from the exhibit of the same number and description filed with the registrant’s Annual Report on Form 10-K (File No. 000-53815) filed on March 31, 2015.

 

Exhibit Number	Description of Document
4.1	Second Amended and Restated Agreement of Limited Partnership of Altegris QIM Futures Fund, L.P.

 

The following exhibits are included herewith.

 

Exhibit Number	Description of Document
31.01	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.02	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32.01	Section 1350 Certification of Principal Executive Officer
32.02	Section 1350 Certification of Principal Financial Officer

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: May 15, 2018

 

ALTEGRIS QIM FUTURES FUND, L.P.

 

By:	ALTEGRIS ADVISORS, L.L.C.,
		its general partner

/s/ Martin Beaulieu
Martin Beaulieu, Principal Executive Officer and Principal Financial Officer