Attached files
| file | filename |
|---|---|
| EX-31.2 - NESTOR PARTNERS | v178999_ex31-2.htm |
| EX-31.3 - NESTOR PARTNERS | v178999_ex31-3.htm |
| EX-32.2 - NESTOR PARTNERS | v178999_ex32-2.htm |
| EX-32.1 - NESTOR PARTNERS | v178999_ex32-1.htm |
| EX-31.1 - NESTOR PARTNERS | v178999_ex31-1.htm |
| EX-32.3 - NESTOR PARTNERS | v178999_ex32-3.htm |
| EX-13.01 - NESTOR PARTNERS | v178999_ex13-01.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
þ Annual
Report Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
For the
Fiscal Year Ended: December 31, 2009
or
¨ Transition
Report Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Commission
File Number: 000-50725
NESTOR
PARTNERS
(Exact
name of registrant as specified in its charter)
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New Jersey
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22-2149317
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|
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(State
or other jurisdiction of
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(I.R.S.
Employer
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|
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incorporation
or organization)
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Identification
No.)
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c/o
MILLBURN RIDGEFIELD CORPORATION
411 West
Putnam Avenue
Greenwich, Connecticut 06830
(Address
of principal executive offices) (Zip code)
Registrant’s
telephone number, including area
code: (203) 625-7554
Securities
registered pursuant to Section 12(b) of the
Act: None
Securities
registered pursuant to Section 12(g) of the Act: Limited Partnership
Interests
(Title of
Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ¨ No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes ¨ No
¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
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Large
accelerated filer ¨
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Accelerated
Filer ¨
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Non-accelerated
filer ¨ (Do
not check if a smaller reporting company)
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Smaller
Reporting Company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No
x
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.
Not
applicable.
Documents
Incorporated by Reference
Registrant’s
Financial Statements for the years ended December 31, 2009, 2008 and 2007 with
Report of Independent Registered Public Accounting Firm, the annual report to
security holders for the fiscal year ended December 31, 2009, is incorporated by
reference into Part II Item 8 and Part IV hereof and filed as an exhibit
herewith.
PART
I
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Item
1.
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Business
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(a) General development of business
Nestor
Partners (the “Partnership”) is a limited partnership organized December 13,
1976 under the New Jersey Uniform Limited Partnership Act. The
general partner of the Partnership is Millburn Ridgefield Corporation, a
Delaware corporation (the “General Partner”).
The
Partnership’s business is trading a diversified portfolio (a “Diversified
Portfolio”) of futures, forward, swap and related option contracts on
currencies, metals, interest rate instruments, stock indices, energy and
agricultural commodities. Approximately 30%-40% of the Partnership’s
trading, measured by the General Partner’s assessment of risk, currently takes
place in the currency markets. The Partnership began its trading
activities in February 1977. All trading decisions are made by the
General Partner.
The
General Partner was organized in May 1982 to manage discretionary accounts in
futures and forward markets. It is the corporate successor to a
futures trading and advisory organization which has been continuously managing
assets in the currency and futures markets using quantitative, systematic
techniques since 1971. The General Partner has been registered with
the Commodity Futures Trading Commission (“CFTC”) as a “commodity pool operator”
since July 1, 1982 and as a “commodity trading advisor” since September 13, 1984
and is a member of the National Futures Association (“NFA”). The
Millburn Corporation, an affiliate of the General Partner, performs certain
accounting, administrative and operating functions for the Partnership and other
commodity pools and investment partnerships managed by the General
Partner.
As of
December 31, 2009, the aggregate Net Asset Value of the Partnership was
$147,253,288. The value at December 31, 2009 of a limited partner’s
initial $1,000 investment in the Partnership on February 1, 1977 would be
$51,766.76, based on the actual rate of return a limited partner’s investment in
the Partnership would have recognized, net of the highest charges applicable to
a limited partner, during each month in the calculation period from February
1977 to December 31, 2009.
The
Partnership’s fiscal year ends on December 31.
The
Partnership will terminate on October 31, 2017 or upon the prior withdrawal,
insolvency or dissolution of the General Partner or occurrence of any event
legally requiring termination.
The
Partnership is not a registered investment company or mutual
fund. Accordingly, investors in the Partnership do not have the
protections afforded by the Investment Company Act of 1940, as
amended.
(b) Financial information about industry segments
The
Partnership’s business constitutes only one segment, i.e., a speculative
commodity pool. The Partnership does not engage in sales of goods and
services. Financial information regarding the Partnership’s business
is set forth in the Partnership’s Financial Statements included as Exhibit 13.01
to this report.
(c) Narrative description of business
The
Partnership engages in the speculative trading of futures, forward and swap
contracts, and options thereon. The Partnership’s sole trading
adviser is the General Partner. The Partnership trades, pursuant to
the General Partner’s Diversified Portfolio, in the agricultural, metals,
energy, interest rate and stock indices futures markets and in the currency
markets, trading primarily forward contracts in the interbank
market. The objective of the General Partner’s trading method is to
participate in all major sustained price moves in the markets traded. The
General Partner’s approach is medium-term to long-term in nature. The General
Partner makes trading decisions pursuant to its trading method, which includes
technical trend analysis, certain non-trend-following technical systems, and
money management principles, which may be revised from time to
time.
The
General Partner is engaged in an ongoing research effort to improve its trading
methods and to apply its quantitative analytic expertise to new financial
products.
2
Successful
systematic futures trading depends on two factors: 1) development and selection
of the trading systems used in each market and 2) allocation of portfolio risk
among the markets available for trading.
Market
environments change over time, and particular systems may perform well in one
environment but poorly in another. Likewise, portfolio sectors and
individual markets go through periods where systematic trading is very
profitable and other periods where no system makes any money.
The goal
of the General Partner’s research has been to develop and select a mix of
systems in each market and allocate risk across a wide array of markets, so as
to contain overall portfolio risk within the targeted range, while allowing
exposure to profitable trend opportunities. Over the last 30 years,
the General Partner has developed hundreds of trading systems. These trading
systems generate buy or sell decisions in a particular market based on the
direction of price movements in the market, some non-price information or a
combination thereof.
Of
course, systems can be materially different – better in some periods and worse
in others. The main distinguishing features are the time-frame over
which systems work (intra-day to long-term), the type of data fed into them
(granularity [ticks to weeks/months], type [market or economic statistics],
source [cash, futures or options markets]), and the objective of the system
(profiting from trends, trading-ranges or volatility). No single
approach will work all the time. Therefore, the General Partner’s
objective is to have several approaches operating at all times. Since
the early 1980’s, the General Partner has selected multiple systems for each
market.
When
arriving at the portfolio allocation, the General Partner seeks maximum
diversification subject to liquidity constraints. The markets traded
and allocations are reviewed monthly, although changes may occur more or less
frequently. The following factors are considered in constructing a
universe of markets to trade for each portfolio: profitability,
correlation of market performance, liquidity of markets, professional judgment,
desired diversification and transaction costs. Once the universe of
markets is established, the General Partner’s simulation and optimization
techniques help determine which markets to include in the
portfolio. The current allocation to any market in the portfolio does
not exceed 2.5%.
In
attempting to assess market volatility as a means of monitoring and evaluating
risk, the General Partner uses its volatility overlay as a part of individual
market risk management. This system is designed to measure the risk in the
portfolio’s position in each market and signals a decrease in position size when
risk increases and an increase in position size when risk decreases. The General
Partner’s volatility overlay maintains overall portfolio risk and distribution
of risk across markets within designated ranges. It is applied to the
systematic strategies described above. A secondary benefit of the
volatility overlay can be timely profit taking. Because markets tend
to become more volatile after a profitable trend has been long underway, the
volatility overlay often signals position reductions before trend
reversals.
In
addition to the volatility overlay, the General Partner’s risk management
focuses on money management principles applicable to the portfolio as a whole
such as portfolio diversification and control of leverage and portfolio
size. There are, however, no restrictions on the amount of leverage
the General Partner may use at any time.
Pursuant
to the Amended and Restated Agreement of Limited Partnership (the “Limited
Partnership Agreement”), the General Partner receives in respect of limited
partners who acquire their limited partnership interests (“Interests”) through
selling agents, a flat-rate monthly brokerage fee equal to 0.458 of 1% of the
month-end Net Assets (a 5.5% annual rate) attributable to such limited
partners. In respect of limited partners who acquire their Interests
through the General Partner, the General Partner receives brokerage commissions
at a monthly flat-rate of 0.167% of the month-end Net Assets (a 2.0% annual
rate) attributable to such limited partners plus an amount equal to the
brokerage commissions and fees payable to clearing and executing brokers
attributable to such limited partners’ proportionate interest in the
Partnership. The General Partner in turn bears all brokerage
commissions and fees payable to clearing and executing brokers as well as all
compensation payable to selling agents, if any. The General Partner
also receives a profit share equal to 20% of any new trading profit, determined
as of the end of each calendar year. The annual profit share is
calculated net of brokerage fees and administrative expenses.
The
Partnership pays its administrative expenses, including costs incurred in
connection with the continuing offering of the Interests, and any extraordinary
expenses which it may incur.
3
J.P.
Morgan Futures Inc. (“J.P. Morgan”), Deutsche Bank Securities Inc. (“Deutsche
Bank”), Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”)
and Newedge USA, LLC (“Newedge”) act as the futures brokers for the
Partnership. The Partnership executes currency forward trades with
several brokers and banks, including Morgan Stanley & Co. Inc. and Deutsche
Bank AG, and clears all such trades with Morgan Stanley & Co. Inc. and
Deutsche Bank AG, serving as prime brokers. The Partnership pays “bid
asked” spreads on its forward trades, as such spreads are incorporated into the
pricing of forward contracts. The General Partner monitors the
Partnership’s trades to ensure that the prices it receives are
competitive.
Each
partner has a capital account, and its initial balance is the amount of his
contribution to the Partnership. There is also a new profit memo
account which is credited with the General Partner’s profit share on redeemed
Interests and any excess of the General Partner’s profit share over the
Partnership’s taxable gains at year-end. The Net Assets of the
Partnership are determined monthly, and any increase or decrease from the end of
the preceding month is added to or subtracted from the accounts (including the
new profit memo account) of the partners in the ratio that each account bears to
all accounts. The credits to the new profit memo account are charged
to the accounts of the limited partners.
At the
end of each fiscal year the Partnership’s taxable capital gain or loss
(including gains and losses on open positions in certain futures and forward
contracts which are “marked-to-market” at the end of the Partnership’s fiscal
year) and ordinary income and expense are allocated among the partners for tax
purposes, and each partner who is a United States (“U.S.”) citizen or resident
is required to include on his personal income tax return his distributive share
of such items. Items of operating income such as interest and items
of operating expense such as legal, accounting and filing fees that accrued
during each month will be allocated among the persons who were partners during
each month in the ratio that each partner’s capital account bears to all
partners’ capital accounts.
Net
capital gain is allocated first to the General Partner up to the amount of the
General Partner’s profit share for the year and then up to the amount of any
balance in the new profit memo account. Net capital gain is next
allocated to each partner who has redeemed all or a portion of his Interests
during the year to the extent that the amount received on redemption exceeds the
partner’s tax basis (“Tax Basis”). A partner’s Tax Basis is the
amount paid for the Interests redeemed plus net taxable income less taxable
losses previously allocated to such Interests and less amounts previously
distributed to the partner with respect to the redeemed
Interests. Remaining net capital gain is allocated among the partners
whose capital accounts have increased from their Tax Basis. The
allocation to each partner is in the ratio that his increase bears to all
partners’ increases. Net capital gain remaining is allocated to each
partner in the ratio that his capital account value bears to the total capital
account value of all partners.
Net
capital loss is allocated first to each partner who has redeemed all or a
portion of his Interests during the year to the extent that the amount the
partner’s Tax Basis for the Interests redeemed exceeds the amount received on
redemption. Remaining net taxable capital loss is allocated among the
partners whose capital accounts have decreased from their Tax
Basis. The allocation to each partner is in the ratio that his
decrease bears to all partners’ decreases. Net capital loss remaining
is allocated to each partner in the ratio that his capital account value bears
to the total capital account value of all partners.
The
Partnership’s cash and short-term U.S. Treasury instruments are used by the
Partnership to engage in its trading activities and as reserves to support that
trading. The Partnership’s assets deposited with the Partnership’s
futures brokers as margin are maintained in “customer segregated funds accounts”
or “foreign futures and foreign options secured amount accounts” and are held in
cash, or short-term U.S. Treasury instruments. Partnership assets not
deposited as margin are maintained in custody, bank or brokerage accounts and
are held primarily in short-term U.S. Treasury instruments or a U.S. government
securities and related instruments money market fund.
The
Partnership does not engage in lending (other than through permitted securities
investments). The General Partner does not anticipate making any
distributions of Partnership profits, if any.
4
Regulation
Under the
Commodity Exchange Act, as amended (the “CEA”), commodity exchanges and futures
trading are subject to regulation by the CFTC. NFA, a “registered
futures association” under the CEA, is the only non-exchange self-regulatory
organization for futures industry professionals. The CFTC has
delegated to NFA responsibility for the registration of “commodity trading
advisors,” “commodity pool operators,” “futures commission merchants,”
“introducing brokers” and their respective associated persons and “floor
brokers” and “floor traders.” The CEA requires commodity pool
operators and commodity trading advisors, such as the General Partner, and
commodity brokers or futures commission merchants, such as J.P. Morgan, Deutsche
Bank, Merrill Lynch and Newedge to be registered and to comply with various
reporting and record keeping requirements. The CFTC may suspend a
commodity pool operator’s or trading advisor’s registration if it finds that its
trading practices tend to disrupt orderly market conditions or in certain other
situations. In the event that the registration of the General Partner
as a commodity pool operator or a commodity trading advisor were terminated or
suspended, the General Partner would be unable to continue to manage the
business of the Partnership. Should the General Partner’s
registration be suspended, termination of the Partnership might
result.
In
addition to such registration requirements, the CFTC and certain commodity
exchanges have established limits on the maximum net long or net short position
which any person may hold or control in particular commodities. Most
exchanges also limit the changes in futures contract prices that may occur
during a single trading day. Currency forward contracts are not
subject to regulation by any U.S. Government agency.
(i) through
(xii) - not applicable.
(xiii) the
Partnership has no employees.
(d) Financial information about
geographic areas
The
Partnership does not engage in material operations in foreign countries
(although it does trade from the U.S. in foreign currency forward contracts and
on foreign futures exchanges), nor is a material portion of its revenues derived
from foreign customers.
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Item
1A.
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Risk
Factors
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Not
required.
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Item
1B.
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Unresolved Staff
Comments
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Not required.
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Item
2.
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Properties
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The
Partnership does not own or use any physical properties in the conduct of its
business. The General Partner or an affiliate perform administrative
services for the Partnership from their offices.
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Item
3.
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Legal Proceedings
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The
General Partner is not aware of any pending legal proceedings to which either
the Partnership is a party or to which any of its assets are
subject. In addition there are no pending material legal proceedings
involving the General Partner.
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Item
4.
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(Removed and
reserved)
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5
PART
II
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Item
5.
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Market for the Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity
Securities
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(a) Market Information.
There is
no trading market for the Interests, and none is likely to
develop. Interests may be redeemed upon 15 business days’
written notice to the General Partner at their Net Asset Value as of the last
day of any month, subject to certain early redemption charges.
(b) Holders.
As of
December 31, 2009, there were 400 holders of Interests.
(c) Dividends.
No
distributions or dividends have been made on the Interests, and the General
Partner has no present intention to make any.
(d) Securities Authorized for
Issuance Under Equity Compensation Plans.
None.
(e) Recent Sales of Unregistered
Securities; Use of Proceeds from Registered Securities.
Interests
are sold on a monthly basis through the General Partner and certain
broker/dealers, the selling agents, retained by the General Partner to act as
its agents. The offering price of an Interest is equal to the amount
of cash contributed to the Partnership by a limited partner. Between
October 1, 2009 and December 31, 2009, the Partnership issued Interests at the
beginning of each calendar month, as set forth in the following chart, to both
new limited partners as well as to existing limited partners making additional
investments.
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Month
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Number of
Interests Sold to
Limited
Partners
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Dollar Amount
of such
Interests Sold
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Number of
Interests Sold to
Special Limited
Partners
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Dollar
Amount of
such Interests
Sold
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||||||||||||
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October
1, 2009
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0 | $ | 0 | 0 | $ | 0 | ||||||||||
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November
1, 2009
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0 | $ | 0 | 1 | $ | 13,140 | ||||||||||
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December
1, 2009
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0 | $ | 0 | 0 | $ | 0 | ||||||||||
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Total
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0 | $ | 0 | 1 | $ | 13,140 | ||||||||||
The
foregoing Interests were privately offered and sold only to “accredited
investors” as defined in Rule 501(a) of Regulation D under the Securities Act of
1933, as amended (the “1933 Act”), in reliance on the exemption from
registration provided by Rule 506 of Regulation D under the 1933 Act, and with
whom the Partnership, the General Partner or a selling agent acting on behalf of
the General Partner has a pre-existing substantive relationship and with respect
to whom it has been determined that Interests are a suitable
investment.
No
underwriting discounts or underwriting commissions were paid in connection with
such sales.
6
(f) Purchases of Equity
Securities by the Issuer.
Pursuant
to the Limited Partnership Agreement, limited partners may withdraw capital from
their capital accounts in the Partnership as of the end of each calendar
month. The withdrawal of capital by limited partners has no impact on
the value of the capital accounts of other limited partners.
The
following table summarizes limited partner withdrawals during the fourth
calendar quarter of 2009:
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Month
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Limited Partners
Amount withdrawn
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Special Limited Partners
Amount withdrawn
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||||||
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October
31, 2009
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$ | 615,153 | $ | 0 | ||||
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November
30, 2009
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$ | 397,250 | $ | 19,201 | ||||
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December
31, 2009
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$ | 310,467 | $ | 20,000 | ||||
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Total
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$ | 1,322,870 | $ | 39,201 | ||||
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Item
6.
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Selected Financial Data
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Not
required.
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Item
7.
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Management’s Discussion and Analysis of Financial
Condition and Results of Operations
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Liquidity and
Capital Resources
Interests
may be offered for sale as of the beginning, and may be redeemed as of the end,
of each month.
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 monies to pay trading
losses, brokerage commissions and charges. Within broad ranges of
capitalization, the General Partner’s trading positions should increase or
decrease in approximate proportion to the size of the Partnership.
The
Partnership raises additional capital only through the sale of Interests and
capital is increased through trading profits (if any). The
Partnership does not engage in borrowing.
The
Partnership trades futures contracts on interest rate instruments, agricultural
commodities, currencies, metals, energy and stock indices and forward contracts
on currencies. Risk arises from changes in the value of these
contracts (market risk) and the potential inability of counterparties or brokers
to perform under the terms of their contracts (credit risk). Market
risk is generally to be measured by the face amount of the futures positions
acquired and the volatility of the markets traded. The credit risk
from counterparty non-performance associated with these instruments is the net
unrealized gain, if any, on these positions plus the value of the margin or
collateral held by the counterparty. The risks associated with
exchange-traded contracts are generally perceived to be less than those
associated with over-the-counter transactions, because exchanges typically (but
not universally) provide clearinghouse arrangements in which the collective
credit (in some cases limited in amount, in some cases not) of the members of
the exchange is pledged to support the financial integrity of the
exchange. In over-the-counter transactions, on the other hand,
traders must rely solely on the credit of their respective individual
counterparties. Margins which may be subject to loss in the event of
a default, are generally required in exchange trading, and counterparties may
require margin or collateral in the over-the-counter markets.
The
General Partner has procedures in place to control market risk, although there
can be no assurance that they will, in fact, succeed in doing
so. These procedures primarily focus on (1) real time monitoring of
open positions; (2) diversifying positions among various markets;
(3) limiting the assets committed as margin, generally within a range of 5%
to 35% of an account’s Net Assets at exchange minimum margins (including imputed
margins on forward and swap positions), although the amount committed to margin
at any time may be substantially higher; (4) prohibiting pyramiding (that
is, using unrealized profits in a particular market as margin for additional
positions in the same market); and (5) changing the equity utilized for trading
by an account solely on a controlled periodic basis rather than as an automatic
consequence of an increase in equity resulting from trading
profits. The Partnership controls credit risk by dealing exclusively
with large, well capitalized financial institutions as brokers and
counterparties.
7
The
financial instruments traded by the Partnership contain varying degrees of
off-balance sheet risk whereby changes in the market values of the futures and
forward contracts or the Partnership’s satisfaction of the obligations may
exceed the amount recognized in the statement of financial condition of the
Partnership.
Due to
the nature of the Partnership’s business, substantially all its assets are
represented by cash, cash equivalents and U.S. government obligations, while the
Partnership maintains its market exposure through open futures and forward
contract positions.
The
Partnership’s futures contracts are settled by offset and are cleared by the
exchange clearinghouse function. Open futures positions are marked to
market each trading day and the Partnership’s trading accounts are debited or
credited accordingly. Options on futures contracts are settled either
by offset or by exercise. If an option on a future is exercised, the
Partnership is assigned a position in the underlying future which is then
settled by offset. The Partnership’s spot and forward currency
transactions conducted in the interbank market are settled by netting offsetting
positions or payment obligations and by cash payments.
The value
of the Partnership’s cash and financial instruments is not materially affected
by inflation. Changes in interest rates, which are often associated
with inflation, could cause the value of certain of the Partnership’s debt
securities to decline, but only to a limited extent. More important,
changes in interest rates could cause periods of strong up or down market price
trends, during which the Partnership’s profit potential generally
increases. However, inflation can also give rise to markets which
have numerous short price trends followed by rapid reversals, markets in which
the Partnership is likely to suffer losses.
The
Partnership’s assets are generally held as cash or cash equivalents, including
short-term U.S. government obligations, which are used to margin the
Partnership’s futures and forward currency positions and withdrawn, as
necessary, to pay redemptions and expenses. Other than potential
market-imposed limitations on liquidity, due, for example, to limited open
interest in certain futures markets or to daily price fluctuation limits, which
are inherent in the Partnership’s futures and forward trading, the Partnership’s
assets are highly liquid and are expected to remain so. During its
operations through December 31, 2009, the Partnership experienced no meaningful
periods of illiquidity in any of the numerous markets traded by the General
Partner.
Critical Accounting
Estimates
The
Partnership records its transactions in futures and forward currency contracts,
including related income and expenses, on a trade date basis. Open
futures contracts traded on an exchange are valued at fair value, which is based
on the closing settlement price on the exchange where the futures contract is
traded by the Partnership on the day with respect to which Net Assets are being
determined. Open swap contracts are recorded at fair value based on
the closing settlement price for equivalent or similar futures positions that
are traded on an exchange on the day with respect to which Net Assets are being
determined. Open forward currency contracts are recorded at fair
value, based on pricing models that consider the current market
prices (“Spot Prices”) plus the time value of money (“Forward Points”) and
contractual prices of the underlying financial instruments. The Spot
Prices and Forward Points for open forward currency contracts are generally
based on the 3:00 P.M. New York time prices provided by widely used quotation
service providers on the day with respect to which Net Assets are being
determined. The Forward Points from the quotation service providers
are generally in periods of one month, two months, three months and six months
forward while the contractual forward delivery dates for the foreign currency
contracts traded by the Partnership may be in between these
periods.
The
General Partner’s policy is to calculate the Forward Points for each contract
being valued by determining the number of days from the date the forward
currency contract is being valued to its maturity date and then using
straight-line interpolation to calculate the valuation of Forward Points for the
applicable forward currency contract. The General Partner will also
compare the calculated price to the forward currency prices provided by dealers
to determine whether the calculated price is fair and reasonable.
8
The
preparation of financial statements in conformity with accounting principles
generally accepted in the U.S. (“U.S. GAAP”) requires management to make
estimates and assumptions, such as accrual of expenses, that affect the amounts
and disclosures reported in the financial statements. Based on the
nature of the business and operations of the Partnership, the General Partner
believes that the estimates utilized in preparing the Partnership’s financial
statements are appropriate and reasonable, however actual results could differ
from these estimates. The estimates used do not provide a range of
possible results that would require the exercise of subjective
judgment. The General Partner further believes that, based on the
nature of the business and operations of the Partnership, no other reasonable
assumptions relating to the application of the Partnership’s critical accounting
estimates other than those currently used would likely result in materially
different amounts from those reported.
Results of Operations
The
Partnership’s success depends on the General Partner’s ability to recognize and
capitalize on trends and other profit opportunities in different sectors of the
world economy. The General Partner’s trading methods are
confidential, so that substantially the only information that can be furnished
regarding the Partnership’s results of operations is its performance
record. Unlike most operating businesses, general economic or
seasonal conditions have no direct effect on the profit potential of the
Partnership, while, at the same time, its past performance is not necessarily
indicative of future results. Because of the speculative nature of
its trading, operational or economic trends have little relevance to the
Partnership’s results. The General Partner believes, however, that
there are certain market conditions — for example, markets with strong price
trends — in which the Partnership has a better opportunity of being profitable
than in others.
2009
During
2009, the Partnership achieved a net realized and unrealized loss of $10,462,631
from its trading operations (including foreign exchange transactions and
translations). Brokerage commissions of $3,393,459, administrative
expenses of $383,895 and custody fees of $33,357 were paid or
accrued. The Partnership paid a profit share to the General Partner
of $4,964. Interest income of $1,712,546 offset the Partnership’s
expenses resulting in a net loss of $12,565,760 after profit share to the
General Partner. An analysis of the trading gain (loss) by sector is
as follows:
|
Sector
|
% Gain (Loss)
|
|||
|
Currencies
|
(0.66 | )% | ||
|
Energies
|
(2.31 | )% | ||
|
Grains
|
(0.75 | )% | ||
|
Interest
Rates
|
(2.16 | )% | ||
|
Livestock
|
0.21 | % | ||
|
Metals
|
(1.08 | )% | ||
|
Softs
|
0.04 | % | ||
|
Stock
Indices
|
1.17 | % | ||
|
Total
|
(5.54 | )% | ||
The
Partnership produced a loss during 2009. Losses from trading energy,
interest rate, metal, and grain futures and dollar currency forwards outweighed
gains from trading stock index and livestock futures and non-dollar currency
crosses.
From
January into early March, in the wake of the subprime crisis and subsequent
credit crunch and amidst concern about the leadership of U.S. economic policy
following the elections, economic activity was slowing precipitously
worldwide. In this environment, stock indices and commodity prices
were falling. Also, as risk aversion remained widespread, a flight to safety and
quality produced a rising U.S. dollar, declining high yield currencies, and a
flood of funds into government fixed income instruments, and highly liquid
investments. Broadly speaking, these conditions had persisted from
October 2008 into early March 2009. Consequently, the Partnerships’
short stock index, short commodity, long U.S. dollar, and long interest rate
futures positions were profitable early in 2009.
9
Around
March 10, market participants’ attitudes seemed to change
abruptly. First, equity prices rose. Then commodity prices
moved upward. Also, the U.S. dollar started to fall and longer term
interest rates rose. The positions which had been profitable for so
long began to generate losses. These positions were reduced gradually
as the General Partner’s models processed the new data. However,
since trend following strategies accounted for over two-thirds of the program
models and since the average trade duration of trend strategies is over 6
months, it was not until the summer when the positions were reduced, completely
closed and, in many instances, reversed.
During
the third quarter of 2009, the financial markets led the way to profitable
results. Short positions in the U.S. dollar and a number of other
currencies versus higher yielding and commodity based currencies were
profitable. Long stock index futures positions and long interest rate
futures positions added to the gains. The weak U.S. dollar also led
to gains from long positions in precious metals. In the agricultural
sector, short wheat and long sugar trades were profitable.
During
the fourth quarter of 2009, improving economic prospects, especially in the U.S.
and Asia led to gains from long stock index futures positions in the U.S., South
Africa, Norway and Asia-ex Japan. This growth improvement
produced profits from long precious and industrial metals positions, but also
led to higher interest rates which brought losses from long interest rate
futures positions. Long positions in sugar and cotton were profitable, but as
grain prices rose, reversing earlier downtrends, long grain positions lost
money.
2008
During
2008, the Partnership achieved a net realized and unrealized gain of $42,272,187
from its trading operations (including foreign exchange transactions and
translations). Brokerage commissions of $3,779,342, administrative
expenses of $420,720 and custody fees of $29,717 were paid or
accrued. The Partnership paid a profit share to the General Partner
of $5,129,390. Interest income of $4,703,091 offset the Partnership’s
expenses resulting in a net gain of $37,616,109. An analysis of the
trading gain by sector is as follows:
|
Sector
|
% Gain
|
|||
|
Currencies
|
4.36 | % | ||
|
Energies
|
6.40 | % | ||
|
Grains
|
2.63 | % | ||
|
Interest
Rates
|
3.41 | % | ||
|
Livestock
|
0.94 | % | ||
|
Metals
|
2.92 | % | ||
|
Softs
|
0.62 | % | ||
|
Stock
Indices
|
6.45 | % | ||
|
Total
|
27.73 | % | ||
The Partnership registered a strong
gain during 2008. All major sectors—stock indices, currencies,
interest rates, energy, metals and agricultural commodities—contributed
profits.
The ongoing financial and economic
turmoil triggered by the U.S. housing and mortgage crises and subsequent credit
crunch exploded with international ramifications throughout the
year. Central banks in the developed countries made more money
available against a broader range of collateral to a wider group of financial
firms than ever before. In the U.S., increasing evidence of problems
for the real economy deriving from the financial market freeze-up prompted the
Federal Reserve to announce dramatic cuts in the federal funds and discount
rates, and to initiate a series of liquidity enhancing
programs. Extraordinary events during the year
included the U.S. Government’s seizures of Fannie Mae and
Freddie Mac and bailout and substantial takeover of AIG Insurance, the
bankruptcy of Lehman Brothers, “breaking the buck” by a major institutional
money market fund, the rescues and sales of Bear Stearns, Washington Mutual,
Wachovia and Merrill Lynch in the U.S. and several major financial institutions
in Europe, the provision of preferred equity by the Treasury to troubled U.S.
financial institutions and the Treasury’s U.S. auto industry
bailout.
10
In this environment, worldwide
inflation and growth dynamics changed markedly during the
year. Concerns about stagflation with the worst growth slowdown in
the U.S. characterized the first half of 2008, but were replaced during the
second half by worries about global deflation, recession and perhaps even
depression as the world’s financial system seized up and nearly ground to a
halt. In response to margin calls, the loss of credit facilities, and
to avoid insolvency, market participants unwound risky trades, reduced leverage
massively, and sought liquidity and safety. Against this background,
price trends in some sectors—equities and interest rates— though volatile, were
sustained for much of the year. In other sectors—currencies and
commodities—trends reversed abruptly.
Short stock index futures positions
throughout most of Europe, the U.S., Japan and non-Japan Asia produced gains,
particularly during the second half of 2008.
Long positions in U.S., Australian and
Canadian long term and short term interest rate futures were profitable, while
trading of European futures was somewhat unprofitable.
Foreign exchange rates were
volatile. Early in the year the U.S. dollar was under persistent
pressure and short dollar trades were profitable. Over the summer, as
the flight to safety commenced, these short trades lost money and dollar
positions were reversed to long trades. These long dollar positions
produced gains over the last several months of 2008. During the first
half of the year, carry trades—being long high interest rate currencies—were
profitable. Later, however, as risky trades were unwound, these carry
trades produced losses and were reversed. Near year-end these short
positions in high yield currencies were profitable.
Commodity prices overall exhibited
broad swings. Energy prices experienced a strong upward thrust with
crude oil hitting successive new all time highs into early
July. Thereafter, energy prices collapsed. As a result,
long energy positions were very profitable in the January-June period, produced
losses and were reversed to short positions over the summer, and short energy
positions were profitable in the fourth quarter. Returns from metals
trading were also volatile: strong gains from generally long positions in the
January-June period were offset by losses over the summer, which were followed
by strong gains from short industrial metals positions during the fourth
quarter. Trading of agricultural commodities followed a similar
pattern. Long positions at first produced profits, but then generated
losses as they were reversed to short positions which subsequently produced
profits.
2007
During
2007, the Partnership achieved a net realized and unrealized gain of $22,149,013
from its trading operations (including foreign exchange transactions and
translations). Brokerage commissions of $3,533,293, administrative
expenses of $385,059 and custody fees of $22,648 were paid or
accrued. The Partnership paid a profit share to the General Partner
of $3,048,112. Interest income of $7,278,769 offset the Partnership’s
expenses resulting in a net gain of $22,438,670. An analysis of the
trading gain (loss) by sector is as follows:
|
Sector
|
% Gain (Loss)
|
|||
|
Currencies
|
4.17 | % | ||
|
Energies
|
1.57 | % | ||
|
Grains
|
3.92 | % | ||
|
Interest
Rates
|
2.20 | % | ||
|
Livestock
|
0.32 | % | ||
|
Metals
|
2.01 | % | ||
|
Softs
|
(0.99 | )% | ||
|
Stock
Indices
|
1.79 | % | ||
|
Total
|
14.99 | % | ||
11
The Partnership produced a gain in
2007. Strong returns were obtained from trading currency forwards and
grain futures. Solid profits were also attributable to interest rate,
metal, energy and stock index futures trading. The only sector to
register a loss for the year was soft commodities.
During the first half of 2007, the
Partnership’s positions, which are all driven by our technical models, reflected
several themes: solid global growth, high worldwide liquidity, a gradual
tightening of monetary policies worldwide, and a diminution of the dollar’s role
in worldwide trade and reserve management. As a result, the
Partnership, in terms of its broad structure, took short positions in interest
rates, U.S. Dollar trading, except against low interest rate currencies such as
the Japanese Yen and Swiss Franc, cross currency trading of lower interest rate
currencies and natural gas futures; mixed positions in softs and livestock;
moderately long positions in crude oil and petroleum products futures; and long
positions in high interest rate currencies, equity index futures, grain futures
and precious and industrial metal futures.
The positions in financials and metals
were highly profitable, while energy, grain and livestock trading were
unprofitable during the January-June period.
During the summer, the spreading impact
of the sub-prime problem triggered a sharp and widespread drying up of
liquidity, a broad based contraction of “risk-oriented” trades, and a flight to
quality. In particular, equities were sold, government and short-term interest
rate instruments were bought, the dollar was in demand, and carry trades were
unwound. As the financial market turmoil spread, concern about slowing growth
caused metals and energy futures to be sold. All these actions occurred
simultaneously and produced trend reversals in virtually all of the positions
held in the portfolio. Hence, while the Partnership’s portfolio is
diversified across over 100 positions in 8 sectors, diversification was
ineffective and markets became almost universally correlated. In
response to these losses, the General Partner’s directional and volatility
models substantially lowered the Partnership’s position sizes, reducing
exposures by almost two-thirds.
During the final four months of 2007,
many of the trends which had been disrupted by the market dislocations of August
reasserted themselves. In particular, short dollar positions, long energy
positions and long precious metal positions were all
profitable. Interest rate trading was profitable largely because a
flight to quality and safety produced gains on new long positions, particularly
in U.S. Treasury and short-term futures. In addition, a profitable
bull market in grains, which had arisen over the summer, continued and
accelerated. On the other hand, the expanding turmoil in financial markets
proved impervious to the efforts of Central Banks, leading to a sell-off in
equities that generated losses as the Partnership’s long stock index positions
were being reduced and reversed. Also, a continued unwinding of
carry trades led to losses in cross currency trading.
Off-Balance Sheet
Arrangements
The
Partnership does not engage in off-balance sheet arrangements with other
entities.
Contractual
Obligations
The Partnership does not enter into any
contractual obligations or commercial commitments to make future payments of a
type that would be typical for an operating company or that would affect its
liquidity or capital resources. The Partnership’s sole business is
trading futures and forward currency contracts, both long (contracts to buy) and
short (contracts to sell). All such contracts are settled by offset,
not delivery. Substantially all such contacts are for settlement
within four months of the trade date and substantially all such contracts are
held by the Partnership for less than four months before being offset or rolled
over into new contracts with similar maturities. The
Partnership’s Financial Statements, included as Exhibit 13.01 to this report,
present a Condensed Schedule of Investments setting forth net unrealized
appreciation (depreciation) of the Partnership’s open future and forward
currency contracts, both long and short, at December 31, 2009.
|
Item
7A.
|
Quantitative and
Qualitative Disclosures about Market
Risk
|
Not
required.
12
|
Item
8.
|
Financial Statements and Supplementary Data
|
The
report of Deloitte & Touche LLP for the fiscal years ended December 31, 2009
and 2008, as required by this item, is included as Exhibit 13.01 to this
report. Supplementary data is not required.
|
Item
9.
|
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
|
None.
|
Item
9A.
|
Controls and
Procedures
|
The General Partner, with the
participation of the General Partner’s principal executive officers 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 fiscal year covered by this Annual Report, and,
based on their evaluation, have concluded that these disclosure controls and
procedures are effective. There were no significant changes in the
General Partner’s internal controls with respect to the Partnership or in other
factors applicable to the Partnership that could significantly affect these
controls subsequent to the date of their evaluation.
Management’s
Annual Report on Internal Control over Financial Reporting
The
General Partner is responsible for establishing and maintaining adequate
internal control over the Partnership’s financial reporting. Internal control
over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act as a process designed by, or under the supervision of, a company’s
principal executive and principal financial officers and effected by a company’s
board of directors, management and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with U.S. GAAP. The
General Partner’s internal control over financial reporting includes those
policies and procedures that:
•
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the Partnership’s
assets;
•
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of the Partnership’s financial statements in accordance with
U.S. GAAP, and that the Partnership’s receipts and expenditures are being made
only in accordance with authorizations of the General Partner’s management and
directors; and
•
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Partnership’s assets that
could have a material effect on the Partnership’s financial
statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
The
General Partner assessed the effectiveness of its internal control over
financial reporting with respect to the Partnership as of December 31, 2009. In
making this assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control — Integrated Framework. Based on its assessment, management has
concluded that, as of December 31, 2009, the General Partner’s internal control
over financial reporting with respect to the Partnership is effective based on
those criteria.
This
annual report does not include an attestation report of the Partnership’s
independent registered public accounting firm regarding control over financial
reporting. The General Partner’s report was not subject to attestation by
the Partnership’s registered public accounting firm pursuant to rules of the SEC
that temporarily permit the Partnership to only provide the General Partner’s
report in this report.
13
Changes
in Internal Control over Financial Reporting
Section 404 of the Sarbanes-Oxley Act
of 2002 requires the General Partner to evaluate annually the effectiveness of
its internal controls over financial reporting as of the end of each fiscal
year, and to include a management report assessing the effectiveness of its
internal control over financial reporting in all annual reports. There were no
changes in the Partnership’s internal control over financial reporting during
the quarter ended December 31, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Item
9B. Other
Information.
None.
PART
III
Item
10. Directors, Executive Officers and
Corporate Governance
(a,
b) Identification of Directors
and Executive Officers
The
Partnership has no directors or executive officers. The Partnership
is controlled and managed by the General Partner.
The
General Partner, is a Delaware corporation organized in May 1982 to manage
discretionary accounts in futures and forward markets. It is the
corporate successor to a futures trading and advisory organization which has
been continuously managing assets in the currency and futures markets using
quantitative, systematic techniques since 1971.
The
principals and senior officers of the General Partner as of December 31, 2009
are as follows:
Harvey Beker, age
56. Mr. Beker is Co-Chief Executive Officer and Co-Chairman of
the General Partner and The Millburn Corporation. He received a
Bachelor of Arts degree in economics from New York University (“NYU”) in 1974
and a Master of Business Administration degree in finance from NYU in
1975. From June 1975 to July 1977, Mr. Beker was employed by the
investment bank Loeb Rhoades, Inc. where he developed and traded silver
arbitrage strategies. From July 1977 to June 1978, Mr. Beker was a
futures trader at the commodities and brokerage firm of Clayton Brokerage Co. of
St. Louis. Mr. Beker has been employed by The Millburn Corporation
since June 1978 and initially served as the Director of Operations for its
affiliate, Millburn Partners. During his tenure at the General
Partner (including its affiliates, Millburn Partners and CommInVest) he has been
instrumental in the development of the research, trading and operations
areas. Mr. Beker became a principal of the firm in June 1982, and a
partner in the predecessor to ShareInVest in April 1982. Mr. Beker
became registered as an Associated Person of the General Partner effective
November 25, 1986. Additionally, he became listed as a principal and
registered as an associated person of The Millburn Corporation effective
February 8, 1984 and May 23, 1989, respectively. Mr. Beker was an
associated person and listed principal of ShareInVest from February 20, 1986
until February 25, 2007.
Gregg R.
Buckbinder, age 51. Mr. Buckbinder is Senior Vice-President
and Chief Operating Officer of the General Partner and The Millburn
Corporation. He joined the General Partner and The Millburn
Corporation in January 1998 from Odyssey Partners, L.P. where he was responsible
for the operation, administration and accounting of the firm’s merchant banking
and managed account businesses from July 1990 through December
1997. Mr. Buckbinder was employed by Tucker Anthony, a securities
broker and dealer, from June 1985 to July 1990 where he was First Vice President
and Controller, and from August 1983 to June 1984 where he designed and
implemented various operations and accounting systems. He was with
the public accounting firm of Ernst & Whinney from June 1984 to June 1985 as
a manager in the tax department and from September 1980 to August 1983 as a
senior auditor, with an emphasis on clients in the financial services
business. Mr. Buckbinder graduated cum laude from Pace
University (“Pace”) in 1980 with a B.B.A. in accounting and received an M.S. in
taxation from Pace in 1988. He is a Certified Public Accountant and a
member of the American Institute of Certified Public Accountants. Mr.
Buckbinder became listed as a principal of the General Partner effective
February 5, 1999. He became listed as a principal of The Millburn
Corporation effective March 23, 1998. Mr. Buckbinder also became a
partner in ShareInVest in January 2000. Mr. Buckbinder was a listed
principal of ShareInVest from February 28, 2001 until February 25,
2007.
14
George E.
Crapple, age 65. Mr. Crapple is Co-Chief Executive Officer and
Co-Chairman of the General Partner and The Millburn Corporation. In
1966 he graduated with honors from the University of Wisconsin where his field
of concentration was economics and he was elected to Phi Beta
Kappa. In 1969 he graduated from Harvard Law School, magna cum laude, where he was
a member of the Harvard Law Review. He was a lawyer with the law firm
of Sidley & Austin, Chicago, Illinois, from 1969 until April 1, 1983, as a
partner since 1975, specializing in commodities, securities, corporate and tax
law. He was first associated with the General Partner in 1976 and
joined the General Partner and The Millburn Corporation (including its
affiliates, Millburn Partners and CommInVest) on April 1, 1983 on a full-time
basis. He became a partner in ShareInVest in April
1984. Mr. Crapple is a Director, Member of the Executive Committee,
Chairman of the Appeals Committee and a former Chairman of the Eastern Regional
Business Conduct Committee of the NFA, past Chairman of the Managed Funds
Association, a member of the Global Markets Advisory Committee of the CFTC and a
member of the board of directors of the Futures Industry Association
(“FIA”). Mr. Crapple became listed as a principal and registered as
an associated person of the General Partner effective September 13, 1984 and
April 2, 1988, respectively. Additionally, he became listed as a
principal and registered as an associated person of The Millburn Corporation
effective April 9, 1981 and May 23, 1989, respectively. He was also
an associated person and listed principal of ShareInVest from February 20, 1986
until February 25, 2007.
Steven M.
Felsenthal, age 40. Mr. Felsenthal is General Counsel and Chief
Compliance Officer of the General Partner and The Millburn
Corporation. Prior to joining the General Partner and its affiliates
in January 2004, Mr. Felsenthal was a senior associate in the investment
management group at the law firm of Schulte Roth & Zabel LLP (September
1999-January 2004) where he represented and advised hedge funds, registered
investment companies, investment advisers, broker-dealers and banks in
connection with all facets of their asset management businesses, and a member of
the tax department of the law firm of Kramer, Levin, Naftalis & Frankel LLP
(October 1996-September 1999). He graduated cum laude from Yeshiva
University in 1991 with a B.A. degree in political science, and order of the coif from
Fordham University School of Law in 1996, where he also served as an editor of
the Fordham Environmental Law Journal. Mr. Felsenthal received an
LL.M degree in taxation from NYU School of Law in 2001 and has written and been
quoted in numerous published articles, and frequently speaks at conferences, on
various topics related to investment management. Mr. Felsenthal is a
member of the New York State Bar, Chairman of the Managed Funds Association
CPO/CTA Advisory Committee, a member of the Editorial Board of the Journal of
Securities Law, Regulation and Compliance and a faculty member of the Regulatory
Compliance Association’s Chief Compliance Officer University. Mr.
Felsenthal became listed as a principal of the General Partner and The Millburn
Corporation effective June 24, 2004. Mr. Felsenthal also served as
General Counsel and Chief Compliance Officer of ShareInVest.
Mark B.
Fitzsimmons, age 62. Mr. Fitzsimmons is a Senior
Vice-President of the General Partner and The Millburn
Corporation. His responsibilities include both business development
and investment strategy. He joined the General Partner and its
affiliates in January 1990 from the brokerage firm of Morgan Stanley & Co.
Inc. where he was a Principal and Manager of institutional foreign exchange
sales and was involved in strategic trading for the firm from October 1987 until
January 1990. From September 1977 to October 1987 he was with the
financial institution Chemical Bank New York Corporation (“Chemical”) first as a
Senior Economist in Chemical’s Foreign Exchange Advisory Service and later as a
Vice-President and Manager of Chemical’s Corporate Trading
Group. While at Chemical he also traded both foreign exchange and
fixed income products. From September 1973 to September 1977 Mr.
Fitzsimmons was employed by the Federal Reserve Bank of New York, dividing his
time between the International Research Department and the Foreign Exchange
Department. He graduated summa cum laude from the
University of Bridgeport, Connecticut in 1970 with a B.S. degree in
economics. His graduate work was done at the University of Virginia,
where he received a certificate of candidacy for a Ph.D. in economics in
1973. Mr. Fitzsimmons became listed as a principal and registered as
an associated person of the General Partner effective July 2, 1993, and April
15, 2009, respectively. He became listed as a principal and
registered as an associated person of The Millburn Corporation effective June
20, 1995 and October 12, 1992, respectively. Mr. Fitzsimmons was a
partner in ShareInVest beginning in January 2000. Mr. Fitzsimmons was
a listed principal of ShareInVest from May 19, 1999 until February 25,
2007.
15
Barry Goodman,
age 52. Mr. Goodman is Executive Vice-President, Director of
Trading and a member of the Research Committee of the General Partner and The
Millburn Corporation. Mr. Goodman joined the General Partner and The
Millburn Corporation (including its affiliate, Millburn Partners) in November
1982 as Assistant Director of Trading. His responsibilities include
overseeing the firm’s trading operations and managing its trading relationships,
as well as the design and implementation of trading systems. From
September 1980 through October 1982 he was a commodity trader at the brokerage
firm of E. F. Hutton & Co., Inc. (“E.F. Hutton”). At E.F. Hutton,
he also designed and maintained various technical indicators and coordinated
research projects pertaining to futures markets. Mr. Goodman
graduated magna cum
laude from Harpur College of the State University of New York in 1979
with a B.A. in economics. Mr. Goodman became listed as a principal
and registered as an associated person of the General Partner effective December
19, 1991 and May 23, 1989, respectively. He also became listed as a
principal and registered as an associated person of The Millburn Corporation
effective June 20, 1995 and April 5, 1989, respectively. He became a
partner in ShareInVest in January 1994. Mr. Goodman was a listed principal of
ShareInVest from May 19, 1999 until February 25, 2007.
Dennis B. Newton,
age 58. Mr. Newton is a Senior Vice-President of the General Partner and
The Millburn Corporation. His primary responsibilities are in
administration and business development. Prior to joining the General
Partner and The Millburn Corporation in September 1991, Mr. Newton was President
of Phoenix Asset Management, Inc., a registered commodity pool operator from
April 1990 to August 1991 and President of its affiliated introducing broker,
Phoenix Futures Inc. (“Phoenix”), from March 1990 to June 1991. Mr.
Newton was listed as a principal of Phoenix Asset Management, Inc. and Phoenix
beginning in June 1990 and April 1990, respectively, and, although he left the
firms in August 1991 and June 1991, respectively, his registration as a
principal was not withdrawn until January 1992 and November 1992,
respectively. Mr. Newton was registered as an associated person of
Phoenix from May 1990 until June 1991 and of Phoenix Asset Management, Inc. from
May 1990 until January 1992 (although he left the firm prior to that date, in
August 1991). Prior to his employment with Phoenix, Mr. Newton was a
Director of Managed Futures with the brokerage firm of Prudential-Bache
Securities Inc. (“Prudential-Bache”) from October 1987 to March 1990, and was
associated with its affiliated futures commission merchant (“FCM”) entity,
Prudential Securities Futures Management, Inc. Until March 1990, he
was registered as an associated person with Prudential Equity Group LLC
(beginning in October 1987), and was listed as a principal of the commodity pool
operator Seaport Futures Management, Inc. (“Seaport”) (beginning in January
1989) and Prudential Securities Futures Management, Inc. (beginning in June
1989). Mr. Newton was a Director of Seaport, and his responsibilities
at Seaport, Prudential-Bache, Prudential Securities Futures Management, Inc. and
Prudential Equity Group LLC included the organization and marketing of public
commodity pools. Mr. Newton joined Prudential-Bache from Heinold
Asset Management, Inc. (“Heinold”), and its affiliated FCM, Heinold Commodities
Inc., where he was a member of the senior management team from October 1974 to
October 1987. Heinold was a pioneer and one of the largest sponsors
of funds utilizing futures and currency forward trading. Mr. Newton
was registered as an associated person (March 1981 – October 1987) of Heinold
Commodities Inc. Mr. Newton was registered as an associated person of
Heinold beginning in January 1986 and was listed as a principal of Heinold
beginning in February 1986. Although Mr. Newton left Heinold in
October 1987, his registration as an associated person and his listing as a
principal were not withdrawn until November 1987. Mr. Newton joined
the General Partner as an associated person in May 1991, and then joined the
General Partner and its affiliates on a full-time basis in September
1991. Mr. Newton became listed as a principal and registered as an
associated person and branch office manager of the General Partner effective May
14, 1997, May 30, 1991 and December 16, 1991, respectively. He also
became listed as a principal of The Millburn Corporation effective May 5,
2004.
Grant N. Smith,
age 58. Mr. Smith is Executive Vice-President and Co-Director
of Research of the General Partner and The Millburn Corporation. He
is responsible for the design, testing and implementation of quantitative
trading strategies, as well as for planning and overseeing the computerized
decision-support systems of the firm. He received a B.S. degree from
the Massachusetts Institute of Technology (“M.I.T.”) in 1974 and an M.S. degree
from M.I.T. in 1975. While at M.I.T., he held several teaching and
research positions in the computer science field and participated in various
projects relating to database management. He joined the predecessor
entity to The Millburn Corporation in June 1975, and has been continuously
associated with the General Partner, The Millburn Corporation and their
affiliates since that time. Mr. Smith became listed as a principal
and registered as an associated person of the General Partner effective December
19, 1991 and April 15, 2009, respectively. He became listed as a
principal and registered as an associated person of The Millburn Corporation
effective June 20, 1995 and May 21, 1992, respectively. Mr. Smith
also became a partner in ShareInVest in January 1994. Mr. Smith was a
listed principal of ShareInVest from May 19, 1999 until February 25,
2007.
16
Tod A. Tanis, age
55. Mr. Tanis is a Vice President, Principal Accounting Officer and
Director of Operations of the General Partner and The Millburn
Corporation. He is responsible for overseeing operations and
accounting for the firm’s commodity pools. He graduated from Grove
City College in May 1976 with a B.A. in accounting and joined the General
Partner and The Millburn Corporation in May 1983. Prior to joining
the General Partner and its affiliates, he was with the brokerage firm of E.F.
Hutton, where he was a Manager from December 1982 to April 1983; a Supervisor
from August 1982 to December 1982; an International Accountant from April 1979
to August 1982; and a staff accountant from June 1978 to April
1979. As a Manager at E.F. Hutton, he was responsible for all
internal and external commodity reporting. Mr. Tanis also served as a
Junior Accountant and then International Staff Accountant with the brokerage
firm of Merrill Lynch & Company from September 1976 to May
1978. Mr. Tanis became listed as a principal of the General Partner
and The Millburn Corporation effective July 14, 2004.
(c) Identification of Certain
Significant Employees
None.
(d) Family
Relationships
None.
(e) Business
Experience
See Item
10 (a, b) above.
(f) Involvement in Certain Legal
Proceedings
None.
(g) Code of
Ethics
The
Partnership has no employees, officers or directors and is managed by the
General Partner. The General Partner has adopted an Executive Code of
Ethics that applies to its principal executive officers, principal financial
officer and principal accounting officer. A copy of this Executive Code of
Ethics may be obtained at no charge by written request to Millburn Ridgefield
Corporation, 411 West Putnam Avenue, Greenwich, Connecticut 06830 or by calling
203-625-7554 (ask for Client Services).
(h) Audit Committee Financial
Expert
Because
the Partnership has no employees, officers or directors, the Partnership has no
audit committee. The Partnership is managed by the General
Partner. Gregg Buckbinder serves as the General Partner’s “audit
committee financial expert.” Mr. Buckbinder is not independent of the
management of the General Partner. The General Partner is a privately
owned corporation managed by its shareholders. It has no independent
directors.
|
Item
11.
|
Executive Compensation
|
The
Partnership has no directors, officers or employees. None of the
directors, officers or employees of the General Partner receive compensation
from the Partnership. The General Partner makes all trading decisions
on behalf of the Partnership. The General Partner receives monthly
brokerage commissions of 0.458 of 1% of the Partnership’s Net Assets (which is
reduced to 0.167 of 1% of Net Assets, plus the cost of all commissions and
clearing charges due to third-party brokers, for partners who acquire their
Interests directly through the General Partner) and an annual profit share of
20% of any new trading profit (net of brokerage commissions and administrative
expenses).
17
|
Item
12.
|
Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder
Matters
|
(a) Security Ownership of Certain Beneficial Owners
As of
December 31, 2009, the General Partner knows of the following persons who own
beneficially more than 5% of the Partnership’s Interests as
follows:
|
Name and Address
|
Value of Interest
|
Percentage of Limited Partnership
Interests
|
||||||||||||||
|
Held Directly
|
Held
Indirectly1
|
% Directly
|
% Indirectly
|
|||||||||||||
|
Malcolm
H. Wiener
c/o
Millburn Ridgefield Corporation
411
W. Putnam Avenue
Greenwich,
CT 06830
|
$ | 20,961,222 | 14.61 | % | ||||||||||||
|
ALFA
Investors
2108
E. South Blvd.
Montgomery,
AL 36116
|
$ | 10,772,167 | 7.51 | % | ||||||||||||
All of
the Partnership’s general partner interest is held by the General
Partner.
(b) Security Ownership of Management
The
Partnership has no officers or directors. Under the terms of the
Limited Partnership Agreement, the Partnership’s affairs are managed by the
General Partner, which has discretionary authority over the Partnership’s
trading. As of December 31, 2009, the General Partner’s interest was
valued at $3,732,571, which constituted 2.53% of the Partnership’s capital as of
December 31, 2009.
As of December 31, 2009, the directors and executive officers of
the General Partner own beneficially Interests as follows:
|
Name
|
Value of Interest
|
Percentage of Limited
Partnership
Interests
|
||||||||||||||
|
Held Directly
|
Held
Indirectly2
|
% Directly
|
% Indirectly
|
|||||||||||||
|
Harvey
Beker
|
$ | 692,657 | $ | 10,337,666 | 0.48 | % | 7.20 | % | ||||||||
|
Gregg
Buckbinder
|
$ | 559,137 | 0.39 | % | ||||||||||||
|
George
Crapple
|
$ | 39,579 | $ | 5,756,664 | 0.03 | % | 4.01 | % | ||||||||
|
Steven
M. Felsenthal
|
$ | 87,145 | 0.06 | % | ||||||||||||
|
Mark
Fitzsimmons
|
$ | 3,041,777 | 2.12 | % | ||||||||||||
|
Barry
Goodman
|
$ | 3,001,532 | 2.09 | % | ||||||||||||
|
Dennis
Newton
|
$ | 529,086 | 0.37 | % | ||||||||||||
|
Grant
Smith
|
$ | 2,273,803 | $ | 1,394,439 | 1.58 | % | 0.97 | % | ||||||||
|
Tod
Tanis
|
$ | 726,461 | 0.51 | % | ||||||||||||
|
directors
and executive officers of the General Partner as a group
|
$ | 3,006,039 | $ | 25,433,907 | 2.09 | % | 17.72 | % | ||||||||
1 Interests
held indirectly include Interests with respect to which a person holds voting or
disposition power: (i) by virtue of serving as one of two or fewer
trustees, custodian or officer of the beneficial owner which is a charitable
entity, benefit plan or custody account for the benefit of a minor; (ii) with
respect to certain Interests owned by members of a person’s immediate family; or
(iii) through a self directed benefit plan.
2 Interests
held indirectly include Interests with respect to which a person holds voting or
disposition power: (i) by virtue of serving as one of two or fewer
trustees, custodian or officer of the beneficial owner which is a charitable
entity, benefit plan or custody account for the benefit of a minor; (ii) with
respect to certain Interests owned by members of a person’s immediate family; or
(iii) through a self directed benefit plan.
18
(c) Changes in Control
None.
(d) Securities Authorized for
Issuance Under Equity Compensation Plans
None.
|
Item
13.
|
Certain Relationships and Related Transactions,
and Director Independence
|
See “Item
11. Executive Compensation”
and “Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters.” The Partnership allocated to the General Partner
$3,393,459 in brokerage fees and allocated $4,964 in profit share to the New
Profits Memo Account for the year ended December 31, 2009. The
General Partner’s interest experienced a loss of $218,408 for the year ended
December 31, 2009. The Partnership allocated to the General Partner
$3,779,342 in brokerage fees and allocated $5,129,390 in profit share to the New
Profits Memo Account for the year ended December 31, 2008. The
General Partner’s interest showed an allocation of income of $1,309,623 for the
year ended December 31, 2008. The General Partner has paid certain
administrative expenses to third-parties on behalf of the Partnership, related
to legal, accounting, auditing, printing, postage and similar administrative
expenses, and has been or will be reimbursed without interest by the
Partnership. The Partnership pays administrative expenses for legal,
audit and accounting services, up to 0.25 of 1% per annum of the Partnership’s
average month-end net assets. A portion of such expenses are paid to
an affiliate of the General Partner, The Millburn Corporation, for the provision
of accounting services to the Partnership. The Partnership incurred
administrative expenses of $383,895 during the year ended December 31, 2009 of
which $191,766 was paid or was payable to The Millburn
Corporation. The Partnership incurred administrative expenses of
$420,720 during the year ended December 31, 2008 of which $272,572 was paid or
was payable to The Millburn Corporation. The General Partner pays all
administrative expenses in excess of 0.25 of 1% per annum of the Partnership’s
average month-end net assets. The Partnership is prohibited from
making any loans.
|
Item
14.
|
Principal Accountant
Fees and Services
|
(1) Audit
Fees
The
aggregate fees for professional services rendered by Deloitte & Touche LLP
in connection with their audit of the Partnership’s financial statements in
connection with the statutory and regulatory filings for the years ended
December 31, 2009 and 2008 were approximately $87,975 and $85,000,
respectively.
19
(2) Audit-Related
Fees
The
aggregate fees rendered by Deloitte & Touche LLP for internal control
consulting services for the benefit of the Partnership for the years ended
December 31, 2009 and 2008 were approximately $21,000 and $0,
respectively.
(3) Tax Fees
The
aggregate fees for professional services rendered by Deloitte & Touche LLP
for tax compliance, advice or planning services for the benefit of the
Partnership for the years ended December 31, 2009 and 2008 were approximately $0
and $16,250, respectively.
(4) All Other
Fees
There
were no other fees for the years ended December 31, 2009 and 2008.
(5) Pre-Approval
Policies
The board
of directors of the General Partner pre-approves the engagement of the
Partnership’s auditor for all services to be provided by the
auditor.
PART
IV
Item
15. Exhibits
and Financial Statement Schedules
(a)(1) Financial Statements
The
following are included with the 2009 Annual Report to Security Holders, a copy
of which is filed herewith as Exhibit 13.01.
Affirmation
of Millburn Ridgefield Corporation
Report of
Independent Registered Public Accounting Firm
Statements
of Financial Condition
Condensed
Schedules of Investments
Statements
of Operations
Statements
of Changes in Partners’ Capital
Statements
of Financial Highlights
Notes to
Financial Statements
(a)(2) Financial Statement Schedules
All
Schedules are omitted for the reason that they are not required or are not
applicable because equivalent information has been included in the financial
statements or the notes thereto.
(a)(3) Exhibits as required by Item 601 of Regulation S-K
The
following exhibits are included herewith.
|
Designation
|
Description
|
|
|
13.01
|
2009
Annual Report to Security Holders
|
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Executive
Officer
|
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Executive
Officer
|
|
|
31.3
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Financial
Officer
|
|
|
32.1
|
Section
1350 Certification of Principal Executive Officer
|
|
|
32.2
|
Section
1350 Certification of Principal Executive Officer
|
|
|
32.3
|
Section
1350 Certification of Principal Financial
Officer
|
20
The
following exhibits were filed by the Partnership as a part of its Registration
Statement on Form 10 (Reg. No. 000-50725) on April 29, 2004 and are incorporated
herein by reference.
|
Exhibit Number
|
Description of Document
|
|
|
3.01
|
Amended
and Restated Certificate of Limited Partnership of Nestor
Partners
|
|
|
3.02
|
Amended
and Restated Agreement of Limited Partnership of Nestor
Partners
|
|
|
10.02
|
Customer
Agreement between Warburg Dillon Reed LLC and Nestor
Partners
|
|
|
10.04
|
Form
of Selling Agreement
|
21
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 31st day of March,
2010.
|
NESTOR
PARTNERS
|
|||
|
By:
|
Millburn
Ridgefield Corporation,
|
||
|
General
Partner
|
|||
|
By:
|
/s/ Harvey Beker
|
|
|
|
Harvey
Beker
|
|||
|
Co-Chief
Executive Officer
|
|||
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the General Partner of the
Registrant and in the capacities and on the date indicated.
|
Title
with
|
||||
|
Signature
|
General Partner
|
Date
|
||
|
/s/ Harvey Beker
|
Co-Chief
Executive
|
March 31,
2010
|
||
|
Harvey
Beker
|
Officer
and Director
|
|||
|
(Principal
Executive Officer)
|
||||
|
/s/ George E. Crapple
|
Co-Chief
Executive
|
March
31, 2010
|
||
|
George
E. Crapple
|
Officer
and Director
|
|||
|
(Principal
Executive Officer)
|
||||
|
/s/ Gregg Buckbinder
|
Chief
Financial and Operating Officer
|
March 31,
2010
|
||
|
Gregg
Buckbinder
|
(Principal
Financial Officer)
|
|||
|
/s/ Tod A. Tanis
|
Vice
President
|
March 31,
2010
|
||
|
Tod
A. Tanis
|
|
(Principal
Accounting Officer)
|
|
(Being the principal executive
officers, the principal financial officer and principal accounting officer, and
a majority of the directors of Millburn Ridgefield Corporation)
22
EXHIBIT
INDEX
The
following exhibits are included herewith.
|
Designation
|
Description
|
|
|
13.01
|
2009
Annual Report to Security Holders
|
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Executive
Officer
|
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Executive
Officer
|
|
|
31.3
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Financial
Officer
|
|
|
32.1
|
Section
1350 Certification of Principal Executive Officer
|
|
|
32.2
|
Section
1350 Certification of Principal Executive Officer
|
|
|
32.3
|
Section
1350 Certification of Principal Financial
Officer
|
The
following exhibits were filed by the Partnership as a part of its Registration
Statement on Form 10 (Reg. No. 000-50725) on April 29, 2004 and are incorporated
herein by reference.
|
Exhibit Number
|
Description of Document
|
|
|
3.01
|
Amended
and Restated Certificate of Limited Partnership of Nestor
Partners
|
|
|
3.02
|
Amended
and Restated Agreement of Limited Partnership of Nestor
Partners
|
|
|
10.02
|
Customer
Agreement between Warburg Dillon Reed LLC and Nestor
Partners
|
|
|
10.04
|
Form
of Selling Agreement
|
23