Exhibit 13.01

 

Global Macro Trust

 

(A Delaware Statutory Trust)

 

Financial Statements for the Years Ended December 31,

2016, 2015 and 2014, and Report of Independent Registered

Public Accounting Firm

 

 

GLOBAL MACRO TRUST

 

TABLE OF CONTENTS

 

	Page(s)
AFFIRMATION OF MILLBURN RIDGEFIELD CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016 AND 2015 AND FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 and 2014:
Statements of Financial Condition	2
Condensed Schedules of Investments	3-6
Statements of Operations	7
Statements of Changes in Trust Capital	8
Statements of Financial Highlights	9
Notes to Financial Statements	10-28

 

 

AFFIRMATION OF MILLBURN RIDGEFIELD CORPORATION

 

In compliance with the Commodity Futures Trading Commission’s regulations, I hereby affirm that to the best of my knowledge and belief, the information contained in the Statements of Financial Condition of Global Macro Trust, including the Condensed Schedules of Investments, as of December 31, 2016 and 2015, and the related Statements of Operations, Changes in Trust Capital and Financial Highlights for each of the three years in the period ended December 31, 2016 are complete and accurate.

 

 

 

Gregg Buckbinder, President

Millburn Ridgefield Corporation

Managing Owner of Global Macro Trust

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Unitholders of Global Macro Trust:

 

We have audited the accompanying statements of financial condition of Global Macro Trust (the “Trust”), including the condensed schedules of investments, as of December 31, 2016 and 2015, and the related statements of operations and changes in trust capital and the financial highlights for each of the three years in the period ended December 31, 2016. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2016, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Global Macro Trust as of December 31, 2016 and 2015, the results of its operations, changes in its trust capital and the financial highlights for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

 

 

 

 

 

 

March 22, 2017

  

 

GLOBAL MACRO TRUST

 

STATEMENTS OF FINANCIAL CONDITION

AS OF DECEMBER 31, 2016 AND 2015

 

		2016				2015
ASSETS
EQUITY IN TRADING ACCOUNTS:
Investments in U.S. Treasury notes — at fair value (amortized cost  $26,072,098 and $36,557,560)		$	26,059,657			$	36,536,889
Net unrealized appreciation on open futures and forward currency contracts			5,065,066				4,388,065
Due from brokers			707,507				7,458,565
Cash denominated in foreign currencies (cost $4,474,848 and $5,080,323)			4,330,175				5,003,029
Total equity in trading accounts			36,162,405				53,386,548
INVESTMENTS IN U.S. TREASURY NOTES — at fair value (amortized cost  $175,434,923 and $148,952,529)			175,334,307				148,800,124
CASH AND CASH EQUIVALENTS			18,864,248				11,740,322
ACCRUED INTEREST RECEIVABLE			397,141				295,838
TOTAL		$	230,758,101			$	214,222,832
LIABILITIES AND TRUST CAPITAL
LIABILITIES:
Subscriptions by Unitholders received in advance		$	865,500			$	572,663
Net unrealized depreciation on open futures and forward currency contracts			-				128,211
Due to brokers			640,342				-
Accrued brokerage fees			1,060,695				1,030,173
Accrued management fees			41,153				32,662
Redemptions payable to Unitholders			2,399,334				2,561,637
Redemptions payable to Managing Owner			2,452,815				828,683
Accrued expenses			133,534				222,847
Total liabilities			7,593,373				5,376,876
TRUST CAPITAL:
Managing Owner interest (3,653.388 and 4,917.000 units outstanding)			4,369,854				5,368,725
Series 1 Unitholders (158,499.560 and 164,988.926 units outstanding)			189,583,168				180,146,458
Series 2 Unitholders (6.799 and 39.121 units outstanding)			10,350				53,412
Series 3 Unitholders (15,531.699 and 13,929.871 units outstanding)			23,999,362				19,275,026
Series 4 Unitholders (2,828.734 and 2,541.689 units outstanding)			5,201,994				4,002,335
Total trust capital			223,164,728				208,845,956
TOTAL		$	230,758,101			$	214,222,832
NET ASSET VALUE PER UNIT OUTSTANDING:
Series 1 Unitholders		$	1,196.11			$	1,091.87
Series 2 Unitholders		$	1,522.28			$	1,365.30
Series 3 Unitholders		$	1,545.19			$	1,383.72
Series 4 Unitholders		$	1,838.98			$	1,574.68

 

See notes to financial statements

 

 

GLOBAL MACRO TRUST

 

CONDENSED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2016

 

		Net Unrealized
		Appreciation
		(Depreciation)				Net Unrealized
		as a % of				Appreciation
		Trust Capital				(Depreciation)
FUTURES AND FORWARD CURRENCY CONTRACTS
FUTURES CONTRACTS
Long futures contracts:
Energies			0.03	%		$	63,669
Grains			(0.00	)			(2,530	)
Interest rates			1.00				2,235,827
Livestock			0.00				1,910
Metals			0.05				126,739
Softs			(0.00	)			(9,610	)
Stock indices			0.53				1,180,856
Total long futures contracts			1.61				3,596,861
Short futures contracts:
Energies			(0.04	)			(93,838	)
Grains			0.01				31,414
Interest rates			(0.01	)			(31,386	)
Livestock			(0.00	)			(2,700	)
Metals			0.10				220,431
Softs			(0.00	)			(7,206	)
Stock indices			(0.14	)			(310,145	)
Total short futures contracts			(0.08	)			(193,430	)
TOTAL INVESTMENTS IN FUTURES CONTRACTS-Net			1.53				3,403,431
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			(0.31	)			(683,199	)
Total short forward currency contracts			1.05				2,344,834
TOTAL INVESTMENTS IN FORWARD CURRENCY  CONTRACTS-Net			0.74				1,661,635
TOTAL			2.27	%		$	5,065,066

 

(Continued)

 

 

GLOBAL MACRO TRUST

 

CONDENSED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2016

 

U. S. TREASURY NOTES

 

Face Amount				Description		Fair Value  as a % of  Trust Capital				Fair Value
$	52,100,000			U.S. Treasury notes, 0.625%, 02/15/2017			23.35	%		$	52,105,088
	49,710,000			U.S. Treasury notes, 0.875%, 05/15/2017			22.30				49,761,458
	48,260,000			U.S. Treasury notes, 0.875%, 08/15/2017			21.64				48,302,416
	51,220,000			U.S. Treasury notes, 0.875%, 11/15/2017			22.95				51,225,002
				TOTAL INVESTMENTS IN U.S. TREASURY NOTES (amortized cost $201,507,021)			90.24	%		$	201,393,964

 

See notes to financial statements

(Concluded)

 

 

GLOBAL MACRO TRUST

 

CONDENSED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2015

 

		Net Unrealized
		Appreciation
		(Depreciation)				Net Unrealized
		as a % of				Appreciation
		Trust Capital				(Depreciation)
FUTURES AND FORWARD CURRENCY CONTRACTS
FUTURES CONTRACTS
Long futures contracts:
Grains			0.00	%		$	48
Interest rates			(0.14	)			(298,622	)
Metals			0.19				397,044
Softs			0.02				41,390
Stock indices			0.28				583,002
Total long futures contracts			0.35				722,862
Short futures contracts:
Energies			0.72				1,506,235
Grains			0.16				336,795
Interest rates			(0.00	)			(1,156	)
Livestock			(0.04	)			(88,790	)
Metals			0.08				173,334
Softs			(0.03	)			(73,715	)
Stock indices			0.04				86,606
Total short futures contracts			0.93				1,939,309
TOTAL INVESTMENTS IN FUTURES CONTRACTS-Net			1.28				2,662,171
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			(0.53	)			(1,104,035	)
Total short forward currency contracts			1.29				2,701,718
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS-Net			0.76				1,597,683
TOTAL			2.04	%		$	4,259,854

 

(Continued)

 

 

GLOBAL MACRO TRUST

 

CONDENSED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2015

 

U. S. TREASURY NOTES

 

						Fair Value
Face						as a % of				Fair
Amount				Description		Trust Capital				Value
$	48,100,000			U.S. Treasury notes, 0.375%, 04/30/2016			23.03	%		$	48,096,242
	45,710,000			U.S. Treasury notes, 0.250%, 05/15/2016			21.87				45,684,110
	44,260,000			U.S. Treasury notes, 0.625%, 07/15/2016			21.20				44,272,102
	47,220,000			U.S. Treasury notes, 0.875%, 09/15/2016			22.64				47,284,559
				TOTAL INVESTMENTS IN U.S. TREASURY NOTES (amortized cost $185,510,089)			88.74	%		$	185,337,013

 

See notes to financial statements

(Concluded)

 

  

GLOBAL MACRO TRUST

 

STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014

 

		2016				2015				2014
INVESTMENT INCOME — Interest income		$	941,571			$	477,084			$	289,332
EXPENSES:
Brokerage and custodial fees			13,188,987				13,566,738				15,803,314
Administrative expenses			1,192,572				1,140,008				1,239,830
Custody fees and other expenses			40,333				50,353				61,226
Management fees			460,718				385,131				405,490
Total expenses			14,882,610				15,142,230				17,509,860
Managing Owner commission rebate to unitholders			(777,662	)			(817,820	)			(454,987	)
Net expenses			14,104,948				14,324,410				17,054,873
NET INVESTMENT LOSS			(13,163,377	)			(13,847,326	)			(16,765,541	)
NET REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			34,149,842				17,999,224				54,277,805
Foreign exchange translation			(300,159	)			(580,900	)			71,870
Net change in unrealized:
Futures and forward currency contracts			805,212				2,370,350				(5,408,170	)
Foreign exchange translation			(67,379	)			166,256				(253,319	)
Net gains (losses) from U.S. Treasury notes:
Realized			-				6,863				7,946
Net change in unrealized			60,019				(176,627	)			(30,279	)
Total net realized and unrealized gains			34,647,535				19,785,166				48,665,853
NET INCOME			21,484,158				5,937,840				31,900,312
LESS PROFIT SHARE TO MANAGING OWNER			551,582				228,356				119,598
NET INCOME AFTER PROFIT SHARE TO MANAGING OWNER		$	20,932,576			$	5,709,484			$	31,780,714
Series 1 Unitholders		$	104.24			$	20.02			$	118.61
Series 2 Unitholders		$	156.98			$	64.92			$	184.35
Series 3 Unitholders		$	161.47			$	68.28			$	189.23
Series 4 Unitholders		$	264.30			$	124.51			$	240.96

 

See notes to financial statements

 

 

GLOBAL MACRO TRUST

 

STATEMENTS OF CHANGES IN TRUST CAPITAL

YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014

 

																																		New Profit Memo
		Series 1 Unitholders								Series 2 Unitholders								Series 3 Unitholders								Series 4 Unitholders								Account								Managing Owner								Total
		Amount				Units				Amount				Units				Amount				Units				Amount				Units				Amount				Units				Amount				Units				Amount
TRUST CAPITAL — January 1, 2014			257,057,401				269,666.902				156,016				139.796				21,885,706				19,432.989				2,305,510				1,906.624				-				-				6,833,096				7,168.282				288,237,729
Subscriptions			1,603,650				1,573.989				-				-				387,750				323.377				479,890				392.910				-				-				-				-				2,471,290
Redemptions			(71,899,612	)			(72,423.402	)			(118,925	)			(100.675	)			(7,176,774	)			(5,908.165	)			(105,216	)			(83.337	)			-				-				(2,719,598	)			(2,590.292	)			(82,020,125	)
Additional units allocated*			-				474.562				-				-				-				-				-				-				-				-				-				436.029				-
Net income after profit share to Managing Owner			26,849,720				-				13,781				-				3,119,843				-				533,677				-				-				-				1,263,693				-				31,780,714
Managing Owner’s profit share			-				-				-				-				-				-				-				-				119,598				113.995				-				-				119,598
Transfer of New Profit Memo Account to Managing Owner			-				-				-				-				-				-				-				-				(119,598	)			(113.995	)			119,598				113.995				-
TRUST CAPITAL — December 31, 2014			213,611,159				199,292.051				50,872				39.121				18,216,525				13,848.201				3,213,861				2,216.197				-				-				5,496,789				5,128.014				240,589,206
Subscriptions			4,012,715				3,741.139				-				-				2,126,191				1,580.234				570,931				387.872				-				-				-				-				6,709,837
Redemptions			(41,449,373	)			(38,398.137	)			-				-				(2,017,003	)			(1,498.564	)			(95,868	)			(62.380	)			-				-				(828,683	)			(758.959	)			(44,390,927	)
Additional units allocated*			-				353.873				-				-				-				-				-				-				-				0.282				-				338.502				-
Net income after profit share to Managing Owner			3,971,957				-				2,540				-				949,313				-				313,411				-				327				-				471,936				-				5,709,484
Managing Owner’s profit share			-				-				-				-				-				-				-				-				228,356				209.161				-				-				228,356
Transfer of New Profit Memo Account to Managing Owner			-				-				-				-				-				-				-				-				(228,683	)			(209.443	)			228,683				209.443				-
TRUST CAPITAL — December 31, 2015			180,146,458				164,988.926				53,412				39.121				19,275,026				13,929.871				4,002,335				2,541.689				-				-				5,368,725				4,917.000				208,845,956
Subscriptions			22,162,866				17,959.432				10,000				6.799				4,987,067				3,290.144				490,419				287.045				-				-				-				-				27,650,352
Redemptions			(29,744,512	)			(24,785.236	)			(57,537	)			(39.121	)			(2,560,874	)			(1,688.316	)			-				-				-				-				(2,452,815	)			(2,051.664	)			(34,815,738	)
Additional units allocated*			-				336.438				-				-				-				-				-				-				-				1.004				-				324.871				-
Net income after profit share to Managing Owner			17,018,356				-				4,475				-				2,298,143				-				709,240				-				1,233				-				901,129				-				20,932,576
Managing Owner’s profit share			-				-				-				-				-				-				-				-				551,582				462.177				-				-				551,582
Transfer of New Profit Memo Account to Managing Owner			-				-				-				-				-				-				-				-				(552,815	)			(463.181	)			552,815				463.181				-
TRUST CAPITAL — December 31, 2016		$	189,583,168				158,499.560			$	10,350				6.799			$	23,999,362				15,531.699			$	5,201,994				2,828.734			$	-				-			$	4,369,854				3,653.388			$	223,164,728

 

* Additional units are issued to Series 1 Unitholders who are charged less than a 7.0% brokerage fee and the Managing Owner. See note 3.

 

See notes to financial statements

 

 

GLOBAL MACRO TRUST

 

STATEMENT OF FINANCIAL HIGHLIGHTS

YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014

 

		2016																2015																2014
		Series 1				Series 2				Series 3				Series 4				Series 1				Series 2				Series 3				Series 4				Series 1				Series 2				Series 3				Series 4
PER UNIT OPERATING PERFORMANCE (FOR A UNIT OUTSTANDING THROUGHOUT THE YEAR)
Net income (loss) from operations:
Net investment loss (a)		$	(78.67	)			(40.26	)			(36.53	)			(6.17	)		$	(72.85	)			(37.29	)			(34.37	)			(7.97	)		$	(71.17	)		$	(36.24	)		$	(33.89	)		$	(9.99	)
Net realized and unrealized gains (losses) on trading of futures and forward currency contracts			182.58				282.10				234.99				270.12				93.67				118.62				119.82				133.77				189.87				225.09				230.46				251.11
Net gains (losses) from U.S. Treasury notes (a)			0.33				2.49				0.30				0.35				(0.80	)			(1.12	)			(1.07	)			(1.29	)			(0.09	)			0.00				(0.09	)			(0.16	)
Net income from operations			104.24				244.33				198.76				264.30				20.02				80.21				84.38				124.51				118.61				188.85				196.48				240.96
Less: profit share allocated to Managing Owner			0.00				87.35				37.29				0.00				0.00				15.29				16.10				0.00				0.00				4.50				7.25				0.00
Net income after profit share allocation			104.24				156.98				161.47				264.30				20.02				64.92				68.28				124.51				118.61				184.35				189.23				240.96
Net asset value, beginning of year			1,091.87				1,365.30				1,383.72				1,574.68				1,071.85				1,300.38				1,315.44				1,450.17				953.24				1,116.03				1,126.21				1,209.21
Net asset value, end of year		$	1,196.11			$	1,522.28			$	1,545.19			$	1,838.98			$	1,091.87			$	1,365.30			$	1,383.72			$	1,574.68			$	1,071.85			$	1,300.38			$	1,315.44			$	1,450.17
RATIOS TO AVERAGE TRUST CAPITAL:
Net investment loss			(6.55	)%			(2.70	)%			(2.40	)%			(0.34	)%			(6.75	)%			(2.80	)%			(2.55	)%			(0.53	)%			(7.02	)%			(3.05	)%			(2.77	)%			(0.75	)%
Total expenses			6.97	%			3.07	%			2.82	%			0.76				6.96	%			3.02	%			2.77	%			0.74				7.13				3.16				2.88				0.86
Profit share allocation (b)			0.00				5.86				2.45				0.00				0.00				1.15				1.19				0.00				0.00				0.38				0.59				0.00
TOTAL EXPENSES AND PROFIT SHARE ALLOCATION			6.97				8.93				5.27				0.76				6.96				4.17				3.96				0.74				7.13				3.54				3.47				0.86
Total return before profit share allocation			9.55	%			17.36	%			14.12	%			16.78				1.87	%			6.14	%			6.38	%			8.59				12.44				16.90				17.39				19.93
Less profit share allocation			0.00				5.86				2.45				0.00				0.00				1.15				1.19				0.00				0.00				0.38				0.59				0.00
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION			9.55	%			11.50	%			11.67	%			16.78	%			1.87	%			4.99	%			5.19	%			8.59	%			12.44	%			16.52	%			16.80	%			19.93	%

 

(a) Calculated based on the weighted average number of units during the year, see Note 7.

(b) The combination of a February 2016 redemption reducing the average capital for Series 2, along with crystallized fees on that redemption, contributed to a larger profit share allocation ratio for Series 2 compared to Series 3.

 

See notes to financial statements

 

  

Global Macro Trust

 

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2016, 2015 and 2014

 

1.

ORGANIZATION

 

Global Macro Trust (the “Trust”) was organized on July 23, 2001, under the Delaware Statutory Trust Act. At such time, original capital of $400 by Millburn Ridgefield Corporation (the “Managing Owner”) and $1,600 by the Initial Unitholder, an affiliated entity, was contributed to the Trust. The Trust commenced trading operations on July 1, 2002. The Trust engages in the speculative trading of futures and forward currency contracts. The instruments that are traded by the Trust are volatile and involve a high degree of market risk.

 

The Managing Owner manages the business of the Trust and makes all trading decisions, as stated in Trust agreement.

 

The Managing Owner has agreed to make additional capital subscriptions, subject to certain possible exceptions, in order to maintain its capital account at not less than 1% of the total outstanding capital subscriptions in the Trust (including the Managing Owner’s subscriptions) but in no event shall the Managing Owner invest less than $500,000. The Managing Owner and the holders (the “Unitholders”) of the Units of Beneficial Interest (“Units”) issued by the Trust will share in any profits and losses of the Trust in proportion to the percentage interest owned by each before brokerage commissions, custodial fee, management fees and profit share allocations.

 

The Trust will dissolve on December 31, 2031 or at an earlier date if certain conditions occur set forth in the Fourth Amended and Restated Declaration of Trust and the Trust Agreement (the “Agreement”).

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation — The financial statements have been prepared in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States (the “U.S.”) as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”). Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation.

 

The Trust is an investment company following the accounting and reporting guidance put forth in Accounting Standard Update (“ASU”) 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements”.

 

Investments — The Trust records its transactions in futures and forward currency contracts and U.S. Treasury notes including related income and expenses on a trade date basis.

 

 

Open futures contracts are valued at quoted market values. Open forward currency contracts are valued at fair value which is based on pricing models that consider the time value of money and the current market and contractual prices of the underlying financial instruments. Brokerage commissions on futures contracts are expensed when contracts are opened. Realized gains (losses) and changes in unrealized appreciation (depreciation) on futures and forward currency contracts are recognized in the periods in which the contracts are closed or the changes in the value of open contracts occur and are included in net realized and unrealized gains (losses) in the Statements of Operations.

 

Investments in U.S. Treasury notes are valued at fair value based on the midpoint of bid/ask quotations reported daily at 3 pm EST by Bloomberg. The Trust amortizes premiums and accretes discounts on U.S. Treasury notes. Such securities are normally on deposit with financial institutions (see Note 6) as collateral for performance of the Trust’s trading obligations with respect to derivative contracts or are held for safekeeping in a custody account at HSBC Bank USA, N.A.

 

Cash and Cash Equivalents — Cash and cash equivalents includes cash and investments in Dreyfus Treasury Prime Cash Management, a short term U.S. government securities money market fund.

 

Cash Denominated in Foreign Currencies — Includes foreign currency cash held at the Trust’s trading counterparties. Foreign cash deficits, if applicable, are presented in the liabilities section of the Statements of Financial Condition.

 

Foreign Currency Translation — Assets and liabilities denominated in foreign currencies are translated to U.S. dollars at prevailing exchange rates of such currencies. Purchases and sales of investments are translated to U.S. dollars at the exchange rate prevailing when such transactions occurred.

 

Income Taxes — The Trust is treated as a limited partnership for federal and state income tax reporting purposes. Accordingly, the Trust prepares calendar year U.S. federal and applicable state tax returns and reports to the Unitholders their allocable shares of the Trust’s income, expenses and trading gains or losses. No provision for income taxes has been made in the accompanying financial statements as the Unitholders are responsible for the payment of taxes.

 

The Income Taxes topic of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Trust recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Trust’s open tax years, 2013 to 2016, the Managing Owner has determined that no reserves for uncertain tax positions were required.

 

Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.

 

Right of Offset — The customer agreements between the Trust and each of its brokers give the Trust the legal right to net unrealized gains and losses with each broker. Unrealized gains and losses related to offsetting transactions with these brokers are reflected on a net basis in the equity in trading accounts in the Statements of Financial Condition.

 

Fair Value of Financial Instruments — The fair value of the Trust’s assets and liabilities which qualify as financial instruments under the Fair Value Measurements and Disclosures topic of the Codification approximates the carrying amounts presented in the Statements of Financial Condition. The topic defines fair value, establishes a framework for measurement of fair value and expands disclosures about fair value measurements. The three levels of the fair value hierarchy are described below:

 

 

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

 

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

 

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

 

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

 

Cash Instruments — The Trust’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 and an investment in a quoted short-term U.S. government securities money market fund. The Managing Owner of the Trust does not adjust the quoted price for such instruments even in situations where the Trust 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 Trust may be in between these periods. The Managing Owner’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.

 

 

During the years ended December 31, 2016 and 2015, there were no transfers of assets or liabilities between Level 1 and Level 2. The following table represents the Trust’s investments by hierarchical level as of December 31, 2016 and 2015 in valuing the Trust’s investments at fair value. At December 31, 2016 and 2015, the Trust held no assets or liabilities classified in Level 3.

 

Financial Assets and Liabilities at Fair Value as of December 31, 2016

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	201,393,964			$	-			$	201,393,964
Short-term money market fund*			18,621,676				-				18,621,676
Exchange-traded futures contracts
Energies			(30,169	)			-				(30,169	)
Grains			28,884				-				28,884
Interest rates			2,204,441				-				2,204,441
Livestock			(790	)			-				(790	)
Metals			347,170				-				347,170
Softs			(16,816	)			-				(16,816	)
Stock indices			870,711				-				870,711
Total exchange-traded futures contracts			3,403,431				-				3,403,431
Over-the-counter forward currency contracts			-				1,661,635				1,661,635
Total futures and forward currency contracts (2)			3,403,431				1,661,635				5,065,066
Total financial assets at fair value		$	223,419,071			$	1,661,635			$	225,080,706

 

Per line item in the Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral		$	26,059,657
Investments in U.S. Treasury notes			175,334,307
Total investments in U.S. Treasury notes		$	201,393,964
(2)
Net unrealized appreciation on open futures and forward currency contracts		$	5,065,066
Net unrealized depreciation on open futures and forward currency contracts			-
Total net unrealized appreciation on open futures and forward currency contracts		$	5,065,066

 

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

 

 

Financial Assets and Liabilities at Fair Value as of December 31, 2015

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	185,337,013			$	-			$	185,337,013
Short-term money market fund*			11,490,322				-				11,490,322
Exchange-traded futures contracts
Energies			1,506,235				-				1,506,235
Grains			336,843				-				336,843
Interest rates			(299,778	)			-				(299,778	)
Livestock			(88,790	)			-				(88,790	)
Metals			570,378				-				570,378
Softs			(32,325	)			-				(32,325	)
Stock indices			669,608				-				669,608
Total exchange-traded futures contracts			2,662,171				-				2,662,171
Over-the-counter forward currency contracts			-				1,597,683				1,597,683
Total futures and forward currency contracts (2)			2,662,171				1,597,683				4,259,854
Total financial assets at fair value		$	199,489,506			$	1,597,683			$	201,087,189

 

Per line item in the Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral		$	36,536,889
Investments in U.S. Treasury notes			148,800,124
Total investments in U.S. Treasury notes		$	185,337,013
(2)
Net unrealized appreciation on open futures and forward currency contracts		$	4,388,065
Net unrealized depreciation on open futures and forward currency contracts			(128,211	)
Total net unrealized appreciation on open futures and forward currency contracts		$	4,259,854

 

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

 

3.

TRUST AGREEMENT

 

With the effectiveness of the Trust’s Registration Statement on August 12, 2009, the Trust began to offer Series 2, Series 3 and Series 4 units. The only units offered prior to such date were Series 1 units. Series 2, Series 3 and Series 4 units were first issued April 1, 2010, September 1, 2009 and November 1, 2010, respectively.

 

 

Series 1 Unitholders pay brokerage fees to the Managing Owner at the annual rate of up to 7.0% of their average month-end Net Assets Value (prior to reduction for accrued brokerage commissions or Profit Share). Series 1 Unitholders who make net capital investments into Series 1 of $100,000 or more or who had previously invested through asset-based fee or fixed fee investment programs are charged less than the annual brokerage rate of 7.0% as follows:

 

Net Capital Investments		Brokerage Fees
$100,000–$499,999			6.50	%
$500,000–$999,999			6.00
Greater than $1,000,000			5.50
Asset-based or fixed fee investment programs			4.00

 

Brokerage fees are charged to capital accounts of the Managing Owner, its principals, their respective affiliates or the New Profit Memo Account only to the extent of charges paid to third party executing and clearing brokers. In order to maintain a uniform Net Asset Value per Unit, additional Units are issued to Series 1 Unitholders who are charged less than a 7.0% brokerage fee.

 

The Managing Owner, not the Trust, pays the allocable share to Series 1 of all routine costs of executing and clearing the Trust’s futures trades including brokerage commissions payable to the clearing brokers and electronic platform trading costs. The Managing Owner also pays, from its own funds, selling commissions on all sales of Series 1 Units.

 

The Trust pays the Managing Owner a management fee of 2% per year of the Trust’s Net Asset Value (before management fee and profit share calculations) attributable to Series 2 and 3 Units. In addition, Series 2 Unitholders pay an annual custodial fee of 0.25% of their attributable Net Asset Value before management fee and profit share calculations. Series 2, 3 and 4 Units are also charged for their pro rata share of the Trust’s actual trade execution and clearing costs including electronic platform trading costs. Series 4 Unitholders are not charged a management fee.

 

For the years ended December 31, 2016, 2015 and 2014, brokerage and custodial fees were as follows:

 

		2016				2015				2014
Brokerage fees		$	13,188,941			$	13,566,607			$	15,803,101
Custodial fees			46				131				213
Total		$	13,188,987			$	13,566,738			$	15,803,314

 

Per the Trust agreement, selling agents are prohibited from receiving amounts in excess of 9.5% of the gross offering proceeds of Series 1 units sold subsequent to August 12, 2009. During the years ended December 31, 2016, 2015, and 2014, the Managing Owner rebated to the Trust for the benefit of all holders of Series 1 Units, all amounts that would have otherwise been due to selling agents but for the 9.5% cap. Further, in certain cases, there are Series 1 units that remain outstanding, where there is no longer a selling agent associated with such units. Beginning in August 2014, the Managing Owner rebated such amounts to the Trust for the benefit of all holders of Series 1 Units. The total amounts rebated to the Trust for both of these items during the years ended December 31, 2016, 2015, and 2014, were $777,662, $817,820, and $454,987 respectively, are presented in “Managing Owner commission rebate to unitholders” in the Statements of Operations.

 

 

The Agreement provides that the Managing Owner’s profit share, equal to 20% of New Trading Profits in excess of the highest cumulative level of Trading Profit as of any previous calendar year-end, is charged to the Unitholders’ capital accounts. The highest cumulative level of Trading Profit is maintained separately for Series 1 and Series 2 and 3 Unitholders in the aggregate. Series 4 Unitholders are not charged profit share. New Trading Profits include realized and unrealized trading profits (losses), brokerage fees, trading-related expenses and administrative expenses. New Trading Profits do not include interest income. For Unitholders’ redemptions during the year, the profit share calculation shall be computed as though the redemption occurred at year-end. Profit share attributable to interests redeemed during a year is tentatively credited to an account maintained for bookkeeping purposes called New Profit Memo Account. Any profit share charged is added to the Managing Owner’s capital account to the extent that net taxable capital gains are allocated to the Managing Owner. The remainder of such profit share, if any, is added to the New Profit Memo Account. The Managing Owner may not make any withdrawal from the balance in the New Profit Memo Account. If, at the end of a subsequent year, net taxable gains are allocated to the Managing Owner in excess of such year’s profit share, a corresponding amount is transferred from the New Profit Memo Account to the Managing Owner’s capital account.

 

The Trust will pay its legal, accounting, auditing, printing, postage and similar administrative expenses (including Trustees’ fees, accounting services fees and the expenses of updating the Prospectus) as well as extraordinary costs. The Managing Owner, at its discretion, may reimburse certain expenses paid by the Trust.

 

Units may be redeemed at the option of any Unitholder at Net Asset Value (as defined in the Agreement) as of the close of business on the last business day of any calendar month on ten business days written notice to the Managing Owner. Series 1 Unitholders who redeem Units at or prior to the end of the first consecutive six-month and five-month periods 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 as follows:

 

		Redemption Charges
Subscriptions		First 6 Months				Second 5 Months
Less than $100,000			4.0	%			3.0	%
$100,000–$499,999			3.5				2.5
$500,000–$999,999			3.0				2.0
Greater than $1,000,000			2.5				1.5

 

 

All redemption charges will be paid to the Managing Owner. At December 31, 2016 and 2015, $0 redemption charges were owed to the Managing Owner. There were no redemption charges paid to the Managing Owner for the years ended December 31, 2016, 2015 and 2014, respectively.

 

4.

DUE FROM/TO BROKERS

 

At December 31, 2016 and 2015, due from and due to brokers balances, if applicable, in the Statements of Financial Condition include net cash receivable from each broker and net cash payable to each broker, respectively.

 

5.

TRADING ACTIVITIES

 

The Trust conducts its futures trading with various futures commission merchants (“FCMs”) on futures exchanges and its forward currency trading with various banks or dealers (“Dealers”) in the interbank markets. Substantially all assets included in the Trust’s equity in trading accounts and certain liability accounts, as discussed below, were held as collateral by such FCMs in either U.S. regulated segregated accounts (for futures contracts traded on U.S. exchanges) or non-U.S. secured accounts (for futures contracts traded on non-U.S. exchanges) as required by U.S. Commodity Futures Trading Commission’s regulations or held as collateral by the Dealers.

 

Liabilities in the Statements of Financial Condition that are components of “Total equity in trading accounts” include net unrealized depreciation on open futures and forward currency contracts, cash denominated in foreign currencies and due to brokers, if any.

 

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

 

6.

DERIVATIVE INSTRUMENTS

 

The Trust is party to derivative financial instruments in the normal course of its business. These financial instruments include futures and forward currency contracts which may be traded on an exchange or OTC.

 

The Trust records its derivative activities on a mark-to-market basis as described in Note 2. For OTC contracts, the Trust enters into master netting agreements with its counterparties. Therefore, assets represent the Trust’s unrealized gains less unrealized losses for OTC contracts in which the Trust has a master netting agreement. Similarly, liabilities represent net amounts owed to counterparties on OTC contracts.

 

Futures contracts are agreements to buy or sell an underlying asset or index for a set price in the future. Initial margin deposits are made upon entering into futures contracts and can be either in cash or treasury securities. Open futures contracts are revalued on a daily basis to reflect the market value of the contracts at the end of each trading day. Variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. When a contract is closed, the Trust records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. The Trust bears the market risk that arises from changes in the value of these financial instruments.

 

 

Forward currency contracts entered into by the Trust represent a firm commitment to buy or sell an underlying currency at a specified value and point in time based upon an agreed or contracted quantity. The ultimate gain or loss is equal to the difference between the value of the contract at the onset and the value of the contract at settlement date.

 

Each of these financial instruments is subject to various risks similar to those related to the underlying financial instruments including market risk, credit risk and sovereign risk.

 

Market risk is the potential change in the value of the instruments traded by the Trust due to market changes including interest and foreign exchange rate movements and fluctuations in futures or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The financial instruments traded by the Trust contain varying degrees of off-balance sheet risk whereby changes in the market values of the futures and forward currency contracts and the Trust’s satisfaction of its obligations related to such market value changes may exceed the amount recognized in the Statements of Financial Condition.

 

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. Credit risk is normally reduced to the extent that an exchange or clearing organization acts as a counterparty to futures transactions since typically the collective credit of the members of the exchange is pledged to support the financial integrity of the exchange. In the case of OTC transactions, the Trust must rely solely on the credit of the individual counterparties. The contract amounts of the forward and futures contracts do not represent the Trust’s risk of loss due to counterparty nonperformance. The Trust’s exposure to credit risk associated with counterparty nonperformance of these forward currency contracts includes unrealized gains inherent in such contracts, which are recognized in the Statements of Financial Condition, plus the value of margin or collateral held in cash and U.S. Treasury Notes by the counterparty. The amount of such credit risk was $12,403,596 and $23,025,005 at December 31, 2016 and 2015, respectively.

 

The Managing Owner has established procedures to actively monitor market risk and minimize credit risk although there can be no assurance that it will in fact succeed in doing so. The Managing Owner’s market risk control procedures include diversification of the Trust’s portfolio and continuously monitoring the portfolio’s open positions, historical volatility and maximum historical loss. The Managing Owner seeks to minimize credit risk primarily by depositing and maintaining the Trust’s assets at financial institutions and brokers which the Managing Owner believes to be creditworthy. The Trust’s trading activities are primarily with brokers and other financial institutions located in North America, Europe and Asia. All futures transactions of the Trust are cleared by major securities firms, pursuant to customer agreements, including Deutsche Bank Securities Inc. (a wholly owned subsidiary of Deutsche Bank AG), J.P. Morgan Securities LLC., Barclays Capital Inc., and SG Americas Securities, LLC., collectively the “Futures Clearing Brokers.” The Trust ceased clearing trades through J.P. Morgan Securities LLC., and Barclays Capital Inc. during September 2015 and April 2014, respectively. For all forward currency transactions, the Trust utilizes three prime brokers, Barclays Bank PLC, Deutsche Bank AG and Morgan Stanley & Co., LLC, (“MS”) collectively the “FX Prime Brokers.” The Trust ceased clearing trades through Barclays Bank PLC during October 2014. MS ceased providing prime broker services during January 2015. The Trust continues to clear trades through MS, utilizing MS as a swap dealer.

 

 

The Trust is subject to sovereign risk such as the risk of restrictions being imposed by foreign governments on the repatriation of cash and the effect of political or economic uncertainties. Net unrealized appreciation (depreciation) on futures and forward currency contracts are denominated in the functional currency (U.S. dollar). Cash settlement of futures and forward currency contracts is made in the local currency (settlement currency) and then translated to U.S. dollars.

 

Net unrealized appreciation (depreciation) on futures and forward currency contracts by settlement currency type, denominated in U.S. dollars, is detailed below:

 

		As of December 31,
		2016								2015
		Total Net								Total Net
		Unrealized								Unrealized
		Appreciation				Percent				Appreciation				Percent
Currency Type		(Depreciation)				of Total				(Depreciation)				of Total
Australian dollar		$	155,137				3.06	%		$	54,432				1.28	%
British pound			494,366				9.76				(70,474	)			(1.65	)
Canadian dollar			27,194				0.54				382,071				8.97
Euro			2,612,792				51.58				258,636				6.07
Hong Kong dollar			38,547				0.76				73,989				1.74
Japanese yen			476,214				9.40				183,109				4.30
Korean won			243,382				4.81				14,676				0.34
Malaysian ringgit			-				-				9,270				0.22
Norwegian krone			(89,811	)			(1.77	)			(53,793	)			(1.26	)
Polish zloty			(42,931	)			(0.85	)			(145,789	)			(3.42	)
Singapore dollar			(4,223	)			(0.08	)			(11,349	)			(0.27	)
South African rand			15,831				0.31				70,730				1.66
Swedish krona			(117,247	)			(2.31	)			33,757				0.79
Turkish lira			(36,868	)			(0.73	)			(21,000	)			(0.49	)
U.S. dollar			1,292,683				25.52				3,481,589				81.72
Total		$	5,065,066				100.00	%		$	4,259,854				100.00	%

 

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 Trust’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 Trust’s open positions and the liquidity of the markets in which it trades.

 

The Trust engages in the speculative trading of futures and forward contracts on agricultural commodities, currencies, energies, interest rates, metals and stock indices. The following were the primary trading risk exposures of the Trust at December 31, 2016 and 2015 by market sector:

 

 

Agricultural (grains, livestock and softs) – The Trust’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 Trust. The Trust’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 Trust trades in a large number of currencies including cross-rates—e.g., positions between two currencies other than the U.S. dollar.

 

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

 

Interest Rates – Interest rate movements directly affect the price of the sovereign bond futures positions held by the Trust 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 Trust’s profitability. The Trust’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 Trust also may take positions in futures contracts on the government debt of other countries. The Managing Owner 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 Trust for the foreseeable future.

 

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

 

Stock Indices – The Trust’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 value of futures and forward currency contracts in a net asset position are recorded in the Statements of Financial Condition as “Net unrealized appreciation on open futures and forward currency contracts.” Fair value of futures and forward currency contracts in a liability position are recorded in the Statements of Financial Condition as “Net unrealized depreciation on open futures and forward currency contracts.” The Trust’s policy regarding fair value measurement is discussed in Note 2.

 

Since the derivatives held or sold by the Trust are for speculative trading purposes, derivative instruments are not designated as hedging instruments under the provisions of the Derivatives and Hedging Topic of the Codification. 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 Trust’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 December 31, 2016 and 2015. Fair value, below, is presented on a gross basis even though the contracts are subject to master netting agreements and qualify for net presentation in the Statements of Financial Condition.

 

Fair Value of Futures and Forward Currency Contracts at December 31, 2016

 

																		Net Unrealized
		Fair Value - Long Positions								Fair Value - Short Positions								Gain (Loss) on
Sector		Gains				Losses				Gains				Losses				Open Positions
Futures contracts:
Energies		$	79,741			$	(16,072	)		$	23,290			$	(117,128	)		$	(30,169	)
Grains			-				(2,530	)			89,139				(57,725	)			28,884
Interest rates			2,585,506				(349,679	)			89				(31,475	)			2,204,441
Livestock			1,910				-				-				(2,700	)			(790	)
Metals			659,138				(532,399	)			453,344				(232,913	)			347,170
Softs			240				(9,850	)			70,445				(77,651	)			(16,816	)
Stock indices			1,809,601				(628,745	)			20,868				(331,013	)			870,711
Total futures contracts			5,136,136				(1,539,275	)			657,175				(850,605	)			3,403,431
Forward currency contracts			466,082				(1,149,281	)			2,847,995				(503,161	)			1,661,635
Total futures and  forward currency contracts		$	5,602,218			$	(2,688,556	)		$	3,505,170			$	(1,353,766	)		$	5,065,066

 

 

Fair Value of Futures and Forward Currency Contracts at December 31, 2015

 

																		Net Unrealized
		Fair Value - Long Positions								Fair Value - Short Positions								Gain (Loss) on
Sector		Gains				Losses				Gains				Losses				Open Positions
Futures contracts:
Energies		$	-			$	-			$	1,935,820			$	(429,585	)		$	1,506,235
Grains			48				-				347,695				(10,900	)			336,843
Interest rates			1,030,409				(1,329,031	)			-				(1,156	)			(299,778	)
Livestock			-				-				-				(88,790	)			(88,790	)
Metals			449,863				(52,819	)			657,070				(483,736	)			570,378
Softs			115,553				(74,163	)			100				(73,815	)			(32,325	)
Stock indices			857,616				(274,614	)			119,246				(32,640	)			669,608
Total futures contracts			2,453,489				(1,730,627	)			3,059,931				(1,120,622	)			2,662,171
Forward currency contracts			736,739				(1,840,774	)			3,851,664				(1,149,946	)			1,597,683
Total futures and  forward currency contracts		$	3,190,228			$	(3,571,401	)		$	6,911,595			$	(2,270,568	)		$	4,259,854

 

The effect of trading futures and forward currency contracts is represented on the Statements of Operations for the years ended 2016, 2015, and 2014 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 years ended December 31, 2016, 2015 and 2014

 

Sector		2016				2015				2014
Futures contracts:
Energies		$	(6,966,567	)		$	8,983,430			$	2,981,313
Grains			2,781,648				(2,597,497	)			3,623,367
Interest rates			14,988,237				7,669,389				37,531,206
Livestock			55,290				159,030				893,890
Metals			(1,111,367	)			5,411,115				(2,488,313	)
Softs			(942,605	)			779,782				2,095,657
Stock indices			17,402,260				(87,413	)			2,913,996
Total futures contracts			26,206,896				20,317,836				47,551,116
Forward currency contracts			8,748,158				51,738				1,318,519
Total futures and forward currency contracts		$	34,955,054			$	20,369,574			$	48,869,635

 

 

The following table presents average notional value by sector in U.S. dollars of open futures and forward currency contracts for the years ended December 31, 2016, 2015 and 2014. The Trust’s average net asset value for the years ended 2016, 2015 and 2014 was approximately $226,000,000, $226,000,000 and $260,000,000, respectively.

 

		2016								2015								2014
Sector		Long Positions				Short Positions				Long Positions				Short Positions				Long Positions				Short Positions
Futures contracts:
Energies		$	9,908,768			$	10,663,625			$	1,449,651			$	19,980,201			$	58,506,140			$	36,503,884
Grains			3,483,270				16,076,288				4,514,320				9,729,741				18,708,435				17,339,007
Interest rates			465,765,592				7,201,812				443,862,760				19,265,790				684,099,838				29,797,825
Livestock			55,860				1,364,840				312,778				1,891,970				6,012,536				2,708,046
Metals			8,167,515				14,594,787				2,425,751				25,691,322				32,405,876				13,151,885
Softs			2,494,206				1,866,875				2,068,245				4,421,026				5,798,787				7,150,901
Stock indices			133,506,586				11,752,950				139,974,824				10,986,473				264,077,146				6,713,147
Total futures contracts			623,381,797				63,521,177				594,608,329				91,966,523				1,069,608,758				113,364,695
Forward currency contracts			88,043,150				102,066,994				56,830,540				97,872,490				228,857,494				65,941,926
Total average notional		$	711,424,947			$	165,588,171			$	651,438,869			$	189,839,013			$	1,298,466,252			$	179,306,621

 

Notional values in the interest rate sector were calculated by converting the notional value in local currency of all open interest rate futures positions to 10-year equivalent fixed income instruments, translated to U.S. dollars at each quarter-end during 2016, 2015 and 2014. The 10-year note is often used as a benchmark for many types of fixed-income instruments and the Managing Owner believes it is a more meaningful representation of notional values of the Trust’s open interest rate positions.

 

The customer agreements between the Trust, the Futures Clearing Brokers and the FX Prime Brokers gives the Trust the legal right to net unrealized gains and losses on open futures and foreign currency contracts. The Trust 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 tables summarize the valuation of the Trust’s investments as December 31, 2016 and 2015.

 

Offsetting of derivative assets and liabilities at December 31, 2016

 

		Gross amounts of recognized assets				Gross amounts offset in the Statement of Financial Condition				Net amounts of assets presented in the Statement of Financial Condition
Assets
Futures contracts
Counterparty C		$	3,694,763			$	(1,127,511	)		$	2,567,252
Counterparty I			2,098,548				(1,262,369	)			836,179
Total futures contracts			5,793,311				(2,389,880	)			3,403,431
Forward currency contracts
Counterparty G			1,572,076				(681,507	)			890,569
Counterparty H			1,742,001				(970,935	)			771,066
Total forward currency contracts			3,314,077				(1,652,442	)			1,661,635
Total assets		$	9,107,388			$	(4,042,322	)		$	5,065,066

 

(Continued)

 

 

						Amounts Not Offset in the Statement of Financial Condition
Counterparty		Net amounts of Assets presented in the Statement of Financial Condition				Financial Instruments				Collateral Received(1)(2)				Net Amount(3)
Counterparty C		$	2,567,252			$	-			$	(2,567,252	)		$	-
Counterparty G			890,569				-				-				890,569
Counterparty H			771,066				-				-				771,066
Counterparty I			836,179				-				(836,179	)			-
Total		$	5,065,066			$	-			$	(3,403,431	)		$	1,661,635

 

⁽¹⁾ Collateral received includes trades made on exchanges. These trades are subject to central counterparty clearing where settlement is guaranteed by the exchange. Collateral pledged includes both cash and U.S. Treasury notes held at each respective counterparty.

⁽²⁾ Collateral disclosed is limited to an amount not to exceed 100% of the net amount of assets presented in the Statements of Financial Condition, for each respective counterparty.

⁽³⁾ Net amount represents the amount that is subject to loss in the event of a counterparty failure as of December 31, 2016.

 

(Concluded)

 

 

Offsetting of derivative assets and liabilities at December 31, 2015

 

		Gross amounts of recognized assets				Gross amounts offset in the Statement of Financial Condition				Net amounts of assets presented in the Statement of Financial Condition
Assets
Futures contracts
Counterparty C		$	1,820,652			$	(1,308,411	)		$	512,241
Counterparty I			3,692,768				(1,542,838	)			2,149,930
Total futures contracts			5,513,420				(2,851,249	)			2,662,171
Forward currency contracts Counterparty G			3,495,118				(1,769,224	)			1,725,894
Total assets		$	9,008,538			$	(4,620,473	)		$	4,388,065

 

		Gross amounts of recognized liabilities				Gross amounts offset in the Statement of Financial Condition				Net amounts of liabilities presented in the Statement of Financial Condition
Liabilities
Forward currency contracts Counterparty H		$	1,221,496			$	(1,093,285	)		$	128,211
Total liabilities		$	1,221,496			$	(1,093,285	)		$	128,211

 

(Continued)

 

 

						Amounts Not Offset in the Statement of Financial Condition
Counterparty		Net amounts of  Assets presented in the Statement of Financial Condition				Financial Instruments				Collateral Received(1)(2)				Net Amount(3)
Counterparty C		$	512,241			$	-			$	(512,241	)		$	-
Counterparty G			1,725,894				-				-				1,725,894
Counterparty I			2,149,930				-				(2,149,930	)			-
Total		$	4,388,065			$	-			$	(2,662,171	)		$	1,725,894

 

						Amounts Not Offset in the Statement of Financial  Condition
Counterparty		Net amounts of Liabilities presented in the Statement of Financial Condition				Financial Instruments				Collateral Pledged(1)(2)				Net Amount(4)
Counterparty H		$	128,211				-			$	(128,211	)			-
Total		$	128,211			$	-			$	(128,211	)		$	-

 

⁽¹⁾ Collateral received includes trades made on exchanges. These trades are subject to central counterparty clearing where settlement is guaranteed by the exchange. Collateral pledged includes both cash and U.S. Treasury notes held at each respective counterparty.

⁽²⁾ Collateral disclosed is limited to an amount not to exceed 100% of the net amount of assets presented in the Statements of Financial Condition, for each respective counterparty.

⁽³⁾ Net amount represents the amount that is subject to loss in the event of a counterparty failure as of December 31, 2015.

⁽⁴⁾ Net amount represents the amounts owed by the Trust to each counterparty as of December 31, 2015.

 

(Concluded)

 

 

7.

FINANCIAL HIGHLIGHTS

 

Unit operating performance for Series 1, 2, 3 and 4 Units is calculated based on Unitholders’ trust 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 year. Weighted average number of units for each Series is detailed below:

 

		Years ended December 31,												Date of first issuance
		2016				2015				2014
Series 1			159,980.042				182,693.002				226,646.771			July 23, 2001
Series 2			12.094				39.121				71.411			April 1, 2010
Series 3			14,762.240				14,145.541				16,444.909			September 1, 2009
Series 4			2,774.133				2,496.701				2,198.058			November 1, 2010

 

Ratios are calculated for each Series taken as a whole. Total return for Series 1 investors are presented for Unitholders charged 7% brokerage fee. An individual Unitholder’s per unit operating performance may vary based on the timing of capital transactions and differences in individual Unitholder’s brokerage fee (for Series 1) custodial fee (for Series 2), management fee (for Series 2 and 3) and profit share allocation arrangements.

 

8.

REDEMPTION PAYABLE TO MANAGING OWNER

 

At December 31, 2016 and 2015, redemption payable of $552,815 and $228,683, respectively, was related to profit share earned during the year and allocated to the Managing Owner at each year-end and subsequently paid.

 

9.

SUBSEQUENT EVENTS

 

During the period from January 1, 2017 to March 22, 2017, subscriptions of $5,859,423 were made to the Trust and redemptions of $5,820,495 were made from the Trust. The Managing Owner has performed its evaluation of subsequent events through March 22, 2017, the date the financial statements were issued. Based on such evaluation, no further events were discovered that required disclosure or adjustment to the financial statements.