Global Macro Trust
	(A Delaware Statutory Trust)
	Financial Statements for the Years Ended December 31, 2011, 2010, and 2009, 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 FOR THE YEARS ENDED DECEMBER 31, 2011, 2010, AND 2009:
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		9–12
Notes to Financial Statements		13–26

  

 

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, 2011 and 2010, and the related Statements of Operations and Changes in Trust Capital for the three years in the period ended December 31, 2011 and the Financial Highlights for each of the periods presented, are complete and accurate.

 

Harvey Beker, Co-Chief Executive Officer
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, 2011 and 2010, and the related statements of operations and changes in trust capital for the three years in the period ended December 31, 2011, and the financial highlights for each of the periods presented. 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. 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, 2011 and 2010, and the results of its operations and changes in its trust capital for the three years in the period ended December 31, 2011, and its financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Deloitte & Touche LLP

 

New York, New York
March 13, 2012

 

 

 

 

GLOBAL MACRO TRUST

STATEMENTS OF FINANCIAL CONDITION

AS OF DECEMBER 31, 2011 AND 2010

 

		2011				2010
ASSETS
EQUITY IN TRADING ACCOUNTS:
Investments in U.S. Treasury notes — at fair value (amortized cost $81,041,000 and $146,977,164)		$	81,045,824			$	147,055,005
Net unrealized appreciation on open futures and forward currency contracts			12,894,380				37,402,229
Due from brokers			6,913,738				14,425,007
Cash denominated in foreign currencies (cost $1,754,566 and $8,260,299)			1,719,017				8,404,398
Total equity in trading accounts			102,572,959				207,286,639
INVESTMENTS IN U.S. TREASURY NOTES — at fair value (amortized cost $634,052,301 and $654,167,743)			634,082,662				654,498,603
CASH AND CASH EQUIVALENTS			42,348,737				47,954,734
ACCRUED INTEREST RECEIVABLE			3,339,577				1,421,896
TOTAL		$	782,343,935			$	911,161,872
LIABILITIES AND TRUST CAPITAL
LIABILITIES:
Subscriptions by Unitholders received in advance		$	3,164,450			$	6,440,530
Net unrealized depreciation on open futures and forward currency contracts			917,275				-
Due to Managing Owner			137,996				1,276
Accrued brokerage fees			4,005,466				4,843,008
Accrued management fees			57,276				24,278
Redemptions payable to Unitholders			17,618,625				5,953,490
Redemption payable to Managing Owner			1,259				262,829
Accrued expenses			180,897				239,340
Cash denominated in foreign currencies (cost -$2,107,152 and -$469,938)			2,122,063				471,510
Due to brokers			951,234				-
Total liabilities			29,156,541				18,236,261
TRUST CAPITAL:
Managing Owner interest (8,207.970 and 8,311.477 units outstanding)			9,644,943				10,922,729
Series 1 Unitholders (603,996.596 and 660,222.516 units outstanding)			709,737,394				867,646,692
Series 2 Unitholders (190.737 and 75.492 units outstanding)			240,698				101,957
Series 3 Unitholders (25,863.120 and 10,481.102 units outstanding)			32,771,232				14,178,784
Series 4 Unitholders (606.787 and 55.233 units outstanding)			793,127				75,449
Total trust capital			753,187,394				892,925,611
TOTAL		$	782,343,935			$	911,161,872
NET ASSET VALUE PER UNIT OUTSTANDING:
Series 1 Unitholders		$	1,175.07			$	1,314.17
Series 2 Unitholders		$	1,261.94			$	1,350.56
Series 3 Unitholders		$	1,267.10			$	1,352.80
Series 4 Unitholders		$	1,307.09			$	1,366.01

 

See notes to financial statements

 

 

GLOBAL MACRO TRUST

CONDENSED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2011

 

		Net Unrealized
		Appreciation
		(Depreciation)				Net Unrealized
		as a % of				Appreciation
		Trust Capital				(Depreciation)
FUTURES AND FORWARD CURRENCY CONTRACTS
FUTURES CONTRACTS
Long futures contracts:
Energies			(0.04	)%		$	(317,941	)
Grains			0.10				740,413
Interest rates:
2 Year U.S. Treasury Note (2,581 contracts, settlement date March 2012)			0.05				416,798
5 Year U.S. Treasury Note (2,385 contracts, settlement date March 2012)			0.09				647,000
10 Year U.S. Treasury Note (1,128 contracts, settlement date March 2012)			0.09				679,344
30 Year U.S. Treasury Bond (279 contracts, settlement date March 2012)			0.03				213,719
Other interest rates			0.86				6,494,508
Total interest rates			1.12				8,451,369
Metals			(0.15	)			(1,082,372	)
Softs			(0.05	)			(406,302	)
Stock indices			(0.00	)			(36,565	)
Total long futures contracts			0.98				7,348,602
Short futures contracts:
Energies			0.21				1,577,490
Grains			(0.31	)			(2,352,297	)
Interest rates			(0.01	)			(76,759	)
Livestock			(0.00	)			(24,710	)
Metals			0.05				377,431
Softs			0.18				1,407,123
Stock indices			(0.09	)			(648,340	)
Total short futures contracts			0.03				259,938
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net			1.01				7,608,540
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			(0.14	)			(1,033,705	)
Total short forward currency contracts			0.72				5,402,270
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net			0.58				4,368,565
TOTAL			1.59	%		$	11,977,105
							(Continued)

 

 

GLOBAL MACRO TRUST

CONDENSED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2011

 

U. S. TREASURY NOTES
						Fair Value
Face						as a % of				Fair
Amount				Description		Trust Capital				Value
$	215,950,000			U.S. Treasury notes, 0.875%, 02/29/2012			28.71	%		$	216,236,809
	218,390,000			U.S. Treasury notes, 0.375%, 08/31/2012			29.05				218,782,420
	222,440,000			U.S. Treasury notes, 4.250%, 09/30/2012			30.44				229,234,847
	50,710,000			U.S. Treasury notes, 0.500%, 11/30/2012			6.75				50,874,410
				TOTAL INVESTMENTS IN U.S. TREASURY NOTES (amortized cost $715,093,301)			94.95	%		$	715,128,486

 

See notes to financial statements

(Concluded)

 

 

GLOBAL MACRO TRUST

CONDENSED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2010

 

		Net Unrealized
		Appreciation
		(Depreciation)				Net Unrealized
		as a % of				Appreciation
		Trust Capital				(Depreciation)
FUTURES AND FORWARD CURRENCY CONTRACTS
FUTURES CONTRACTS
Long futures contracts:
Energies			0.33	%		$	2,974,672
Grains			0.72				6,435,870
Interest rates:
2 Year U.S. Treasury Note (1,725 contracts, settlement date March 2011)			(0.04	)			(332,016	)
Other interest rates			0.20				1,791,919
Total interest rates			0.16				1,459,903
Livestock			0.07				578,540
Metals			1.18				10,487,557
Softs			0.32				2,892,994
Stock indices			0.57				5,040,779
Total long futures contracts			3.35				29,870,315
Short futures contracts:
Energies			(0.15	)			(1,326,800	)
Grains			(0.08	)			(707,463	)
Interest rates			(0.01	)			(132,113	)
Livestock			(0.03	)			(295,000	)
Metals			(0.13	)			(1,179,968	)
Softs			(0.03	)			(262,312	)
Stock indices			0.05				498,176
Total short futures contracts			(0.38	)			(3,405,480	)
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net			2.97				26,464,835
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			1.60				14,278,410
Total short forward currency contracts			(0.38	)			(3,341,016	)
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS  — Net			1.22				10,937,394
TOTAL			4.19	%		$	37,402,229
							(Continued)

 

 

GLOBAL MACRO TRUST

CONDENSED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2010

 

U. S. TREASURY NOTES
						Fair Value
Face						as a % of				Fair
Amount				Description		Trust Capital				Value
$	174,000,000			U.S. Treasury notes, 0.875%, 03/31/2011			19.52	%		$	174,299,063
	185,700,000			U.S. Treasury notes, 0.875%, 05/31/2011			20.86				186,251,297
	219,330,000			U.S. Treasury notes, 1.000%, 08/31/2011			24.69				220,460,920
	219,650,000			U.S. Treasury notes, 0.750%, 11/30/2011			24.70				220,542,328
				TOTAL INVESTMENTS IN U.S. TREASURY NOTES (amortized cost $801,144,907)			89.77	%		$	801,553,608

 

See notes to financial statements

(Concluded)

 

 

GLOBAL MACRO TRUST

STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2011, 2010, AND 2009

 

		2011				2010				2009
INVESTMENT INCOME — Interest income		$	2,072,015			$	3,235,502			$	9,966,151
EXPENSES:
Brokerage fees			54,834,929				57,320,175				63,566,376
Administrative expenses			2,158,133				2,233,354				2,670,335
Custody fees			165,650				160,011				193,127
Management fees			571,739				143,533				10,864
Total expenses			57,730,451				59,857,073				66,440,702
NET INVESTMENT LOSS			(55,658,436	)			(56,621,571	)			(56,474,551	)
NET REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			(8,224,392	)			87,904,542				(49,280,152	)
Foreign exchange translation			(52,568	)			352,202				126,508
Net change in unrealized:
Futures and forward currency contracts			(25,425,124	)			42,259,414				(9,457,839	)
Foreign exchange translation			(192,987	)			(302,673	)			352,661
Net gains (losses) from U.S. Treasury notes:
Realized			28,504				16,976				526,749
Net change in unrealized			(373,516	)			(203,035	)			(6,705,006	)
Total net realized and unrealized gains (losses)			(34,240,083	)			130,027,426				(64,437,079	)
NET INCOME (LOSS)			(89,898,519	)			73,405,855				(120,911,630	)
LESS PROFIT SHARE TO MANAGING OWNER			1,385				262,695				43,187
NET INCOME (LOSS) AFTER PROFIT SHARE TO
MANAGING OWNER		$	(89,899,904	)		$	73,143,160			$	(120,954,817	)
NET INCOME (LOSS) AFTER PROFIT SHARE TO
MANAGING OWNER PER UNIT OUTSTANDING (see Note 7):
Series 1 Unitholders		$	(139.10	)		$	102.20			$	(159.03	)
Series 2 Unitholders		$	(88.62	)		$	72.46			$	-
Series 3 Unitholders		$	(85.70	)		$	131.36			$	40.53
Series 4 Unitholders		$	(58.92	)		$	50.68			$	-

 

See notes to financial statements

 

 

GLOBAL MACRO TRUST

STATEMENTS OF CHANGES IN TRUST CAPITAL

YEARS ENDED DECEMBER 31, 2011, 2010, AND 2009

 

																																		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				Units
TRUST CAPITAL — January 1, 2009		$	1,018,820,851				743,122.758			$	-				-			$	-				-			$	-				-			$	-				-			$	11,560,510				8,432.177			$	1,030,381,361				751,554.935
Subscriptions			78,304,008				59,130.010				-				-				1,727,114				1,444.668				-				-				-				-				-				-				80,031,122				60,574.678
Redemptions			(110,305,815	)			(89,327.054	)			-				-				-				-				-				-				-				-				(40,426	)			(33.356	)			(110,346,241	)			(89,360.410	)
Transfers			(461,258	)			(388.822	)			-				-				461,258				386.624				-				-				-				-				-				-				-				(2.198	)
Additional units allocated*			-				1,983.082				-				-				-				-				-				-				-				1.214				-				592.416				-				2,576.712
Net income (loss) after profit share to Managing Owner			(120,377,559	)			-				-				-				48,439				-				-				-				(2,761	)			-				(622,936	)			-				(120,954,817	)			-
Managing Owner’s profit share			-				-				-				-				-				-				-				-				43,187				32.142				-				-				43,187				32.142
Transfer of New Profit Memo Account to Managing Owner			-				-				-				-				-				-				-				-				(40,426	)			(33.356	)			40,426				33.356				-				-
TRUST CAPITAL — December 31, 2009			865,980,227				714,519.974				-				-				2,236,811				1,831.292				-				-				-				-				10,937,574				9,024.593				879,154,612				725,375.859
Subscriptions			31,438,164				25,234.721				95,530				75.492				11,260,170				8,961.540				71,041				55.233				-				-				-				-				42,864,905				34,326.986
Redemptions			(100,149,285	)			(81,345.253	)			-				-				(387,647	)			(311.730	)			-				-				-				-				(1,962,829	)			(1,528.360	)			(102,499,761	)			(83,185.343	)
Additional units allocated*			-				1,813.074				-				-				-				-				-				-				-				0.022				-				615.248				-				2,428.344
Net income after profit share to Managing Owner			70,377,586				-				6,427				-				1,069,450				-				4,408				-				134				-				1,685,155				-				73,143,160				-
Managing Owner’s profit share			-				-				-				-				-				-				-				-				262,695				199.974				-				-				262,695				199.974
Transfer of New Profit Memo Account to Managing Owner			-				-				-				-				-				-				-				-				(262,829	)			(199.996	)			262,829				199.996				-				-
TRUST CAPITAL — December 31, 2010			867,646,692				660,222.516				101,957				75.492				14,178,784				10,481.102				75,449				55.233				-				-				10,922,729				8,311.477				892,925,611				679,145.820
Subscriptions			46,027,878				36,354.165				184,000				136.584				22,838,898				17,047.103				748,874				551.554				-				-				-				-				69,799,650				54,089.406
Redemptions			(116,664,030	)			(94,309.154	)			(28,299	)			(21.339	)			(2,145,759	)			(1,665.085	)			-				-				-				-				(801,260	)			(679.866	)			(119,639,348	)			(96,675.444	)
Additional units allocated*			-				1,729.069				-				-				-				-				-				-				-				0.050				-				575.288				-				2,304.407
Net loss after profit share to Managing Owner			(87,273,146	)			-				(16,960	)			-				(2,100,691	)			-				(31,196	)			-				(126	)			-				(477,785	)			-				(89,899,904	)			-
Managing Owner’s profit share			-				-				-				-				-				-				-				-				1,385				1.021				-				-				1,385				1.021
Transfer of New Profit Memo Account to Managing Owner			-				-				-				-				-				-				-				-				(1,259	)			(1.071	)			1,259				1.071				-				-
TRUST CAPITAL — December 31, 2011		$	709,737,394				603,996.596			$	240,698				190.737			$	32,771,232				25,863.120			$	793,127				606.787			$	-				-			$	9,644,943				8,207.970			$	753,187,394				638,865.210

 

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

 

See notes to financial statements

 

 

GLOBAL MACRO TRUST

STATEMENTS OF FINANCIAL HIGHLIGHTS ― SERIES 1

YEARS ENDED DECEMBER 31, 2011, 2010, AND 2009

 

		2011				2010				2009
PER UNIT OPERATING PERFORMANCE (FOR A UNIT OUTSTANDING THROUGHOUT THE YEAR):
Net income (loss) from operations:
Net investment loss (a)		$	(85.22	)		$	(82.06	)		$	(75.05	)
Net realized and unrealized gains (losses) on trading of futures and forward currency contracts			(53.38	)			184.52				(75.84	)
Net losses from U.S. Treasury notes (a)			(0.50	)			(0.26	)			(8.10	)
Net income (loss) from operations			(139.10	)			102.20				(158.99	)
Less profit share allocated to Managing Owner			0.00				0.00				0.04
Net income (loss) after profit allocation			(139.10	)			102.20				(159.03	)
NET ASSET VALUE — Beginning of year			1,314.17				1,211.97				1,371.00
NET ASSET VALUE — End of year		$	1,175.07			$	1,314.17			$	1,211.97
RETURNS:
Total return before profit share allocation			(10.58	)%			8.43	%			(11.60	)%
Profit share allocation			0.00				0.00				0.00
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION			(10.58	)%			8.43	%			(11.60	)%
RATIOS TO AVERAGE TRUST CAPITAL:
Net investment loss			(6.78	)%			(6.66	)%			(6.00	)%
Total expenses			7.03				7.03				7.05
Profit share allocation			0.00				0.00				0.00
Total expenses and profit share allocation			7.03	%			7.03	%			7.05	%

 

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

 

(Continued)

 

 

GLOBAL MACRO TRUST

STATEMENT OF FINANCIAL HIGHLIGHTS ― SERIES 2

YEAR ENDED DECEMBER 31, 2011 AND THE PERIOD ENDED DECEMBER 31, 2010*

 

		2011				2010
PER UNIT OPERATING PERFORMANCE (FOR A UNIT OUTSTANDING THROUGHOUT THE YEAR/PERIOD):
Net income (loss) from operations:
Net investment loss (a)		$	(32.99	)		$	(23.37	)
Net realized and unrealized gains (losses) on trading of futures and forward currency contracts			(54.87	)			124.78
Net losses from U.S. Treasury notes (a)			(0.76	)			(0.10	)
Net income (loss) from operations			(88.62	)			101.31
Less profit share allocated to Managing Owner			0.00				28.85
Net income (loss) after profit allocation			(88.62	)			72.46
NET ASSET VALUE — Beginning of year/period			1,350.56				1,278.10
NET ASSET VALUE — End of year/period		$	1,261.94			$	1,350.56
RETURNS:
Total return before profit share allocation			(6.56	)%			7.20	%
Profit share allocation			(0.00	)			(1.53	)
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION			(6.56	)%			5.67	%
RATIOS TO AVERAGE TRUST CAPITAL:
Net investment loss			(2.52	)%			(2.45	)%
Total expenses			2.75				2.80
Profit share allocation			0.00				2.27
Total expenses and profit share allocation			2.75	%			5.07	%

 

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

 

*Series 2 units were first issued on April 1, 2010. Net investment loss and total expense ratios for the period ended December 31, 2010 have been annualized.

(Continued)

 

 

GLOBAL MACRO TRUST

STATEMENTS OF FINANCIAL HIGHLIGHTS ― SERIES 3

YEARS ENDED DECEMBER 31, 2011, 2010 AND THE PERIOD ENDED DECEMBER 31, 2009*

 

		2011				2010				2009
PER UNIT OPERATING PERFORMANCE (FOR A UNIT OUTSTANDING THROUGHOUT THE YEAR/PERIOD):
Net income (loss) from operations:
Net investment loss (a)		$	(29.80	)		$	(27.90	)		$	(8.71	)
Net realized and unrealized gains (losses) on trading of futures and forward currency contracts			(55.16	)			206.79				58.50
Net losses from U.S. Treasury notes (a)			(0.68	)			(0.41	)			(0.59	)
Net income (loss) from operations			(85.64	)			178.48				49.20
Less profit share allocated to Managing Owner			0.06				47.12				8.67
Net income (loss) after profit allocation			(85.70	)			131.36				40.53
NET ASSET VALUE — Beginning of year/period			1,352.80				1,221.44				1,180.91
NET ASSET VALUE — End of year/period		$	1,267.10			$	1,352.80			$	1,221.44
RETURNS:
Total return before profit share allocation			(6.33	)%			13.71	%			4.17	%
Profit share allocation			(0.01	)			(2.96	)			(0.74	)
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION			(6.34	)%			10.75	%			3.43	%
RATIOS TO AVERAGE TRUST CAPITAL:
Net investment loss			(2.27	)%			(2.19	)%			(2.14	)%
Total expenses			2.50				2.55				2.61
Profit share allocation			0.01				3.70				0.71
Total expenses and profit share allocation			2.51	%			6.25	%			3.32	%

 

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

 

*Series 3 units were first issued on September 1, 2009. Net investment loss and total expense ratios for the period ended December 31, 2009 have been annualized.

(Continued)

 

 

GLOBAL MACRO TRUST

STATEMENTS OF FINANCIAL HIGHLIGHTS ― SERIES 4

YEAR ENDED DECEMBER 31, 2011 AND THE PERIOD ENDED DECEMBER 31, 2010*

 

		2011				2010
PER UNIT OPERATING PERFORMANCE (FOR A UNIT
OUTSTANDING THROUGHOUT THE YEAR/PERIOD):
Net income (loss) from operations:
Net investment loss (a)		$	(3.46	)		$	(0.38	)
Net realized and unrealized gains (losses) on trading of futures and forward currency contracts			(54.83	)			51.13
Net losses from U.S. Treasury notes (a)			(0.63	)			(0.07	)
Net income (loss) from operations			(58.92	)			50.68
NET ASSET VALUE — Beginning of year/period			1,366.01				1,315.33
NET ASSET VALUE — End of year/period		$	1,307.09			$	1,366.01
TOTAL RETURN			(4.31	)%			3.85	%
RATIOS TO AVERAGE TRUST CAPITAL:
Net investment loss			(0.26	)%			(0.17	)%
Total expenses			0.49	%			0.47	%

 

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

 

*Series 4 units were first issued on November 1, 2010. Net investment loss and total expense ratios for the period ended December 31, 2010 have been annualized.

 

See notes to financial statements

(Concluded)

 

 

Global Macro Trust

NOTES TO FINANCIAL STATEMENTS

 

YEARS ENDED DECEMBER 31, 2011, 2010, and 2009

 

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.

 

The Managing Owner has agreed to make additional capital contributions, subject to certain possible exceptions, in order to maintain its capital account at not less than 1% of the total outstanding capital contributions in the Trust (including the Managing Owner’s contributions) 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, 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 in the United States (“U.S. GAAP”) as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”).

 

Investments — The Trust records its transactions in futures and forward currency contracts and United States (“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 and related instruments money market fund.

 

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 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, 2008 to 2011, for the U.S. Federal jurisdiction, the New York and Delaware State jurisdictions and the New York City jurisdiction, there are no uncertain tax positions. The Trust is treated as a limited partnership for federal and state income tax reporting purposes and therefore the Unitholders are responsible for the payment of taxes.

 

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 and related instruments 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.

 

OTC derivatives or forward currency contracts are valued 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 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 forward currency contracts traded by the Trust may be in between these periods. The Managing Owner’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. 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, 2011 and 2010, 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, 2011 and 2010 in valuing the Trust’s investments at fair value. At December 31, 2011 and 2010, the Trust held no assets or liabilities classified in Level 3.

 

 

Financial Assets at Fair Value as of December 31, 2011

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	715,128,486			$	-			$	715,128,486
Short-term money market fund*			42,244,442				-				42,244,442
Exchange-traded futures contracts
Energies			1,259,549				-				1,259,549
Grains			(1,611,884	)			-				(1,611,884	)
Interest rates			8,374,610				-				8,374,610
Livestock			(24,710	)			-				(24,710	)
Metals			(704,941	)			-				(704,941	)
Softs			1,000,821				-				1,000,821
Stock indices			(684,905	)			-				(684,905	)
Total exchange-traded futures contracts			7,608,540				-				7,608,540
Over-the-counter forward currency contracts			-				4,368,565				4,368,565
Total futures and forward currency contracts (2)			7,608,540				4,368,565				11,977,105
Total financial assets at fair value		$	764,981,468			$	4,368,565			$	769,350,033

 

Per line item in the Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in brokers' trading accounts as collateral		$	81,045,824
Investments in U.S. Treasury notes held in custody			634,082,662
Total investments in U.S. Treasury notes		$	715,128,486
(2)
Net unrealized appreciation on futures and forward currency contracts		$	12,894,380
Net unrealized depreciation on futures and forward currency contracts			(917,275	)
Total unrealized appreciation and depreciation on futures and forward currency contracts		$	11,977,105

 

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

 

 

Financial Assets at Fair Value as of December 31, 2010

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	801,553,608			$	-			$	801,553,608
Short-term money market fund*			47,651,151				-				47,651,151
Exchange-traded futures contracts
Energies			1,647,872				-				1,647,872
Grains			5,728,407				-				5,728,407
Interest rates			1,327,790				-				1,327,790
Livestock			283,540				-				283,540
Metals			9,307,589				-				9,307,589
Softs			2,630,682				-				2,630,682
Stock indices			5,538,955				-				5,538,955
Total exchange-traded futures contracts			26,464,835				-				26,464,835
Over-the-counter forward currency contracts			-				10,937,394				10,937,394
Total futures and forward currency contracts (2)			26,464,835				10,937,394				37,402,229
Total financial assets at fair value		$	875,669,594			$	10,937,394			$	886,606,988

 

Per line item in the Statements of Financial Condition

 

(1)
Investments in U.S. Treasury notes held in brokers' trading accounts as collateral		$	147,055,005
Investments in U.S. Treasury notes held in custody			654,498,603
Total investments in U.S. Treasury notes		$	801,553,608
(2)
Net unrealized appreciation on futures and forward currency contracts		$	37,402,229
Net unrealized depreciation on futures and forward currency contracts			-
Total unrealized appreciation and depreciation on futures and forward currency contracts		$	37,402,229

 

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

 

Recent Accounting Standards —In December 2011, FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities” which creates a new disclosure requirement about the nature of an entity’s rights of setoff and the related arrangement associated with its financial instruments and derivative instruments. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the Statements of Financial Condition and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of International Financial Reporting Standards. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Trust should also provide the disclosures retrospectively for all comparative periods presented. The Managing Owner is currently evaluating the impact that the standard would have on the financial statements.

 

 

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.

 

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, 2011 and 2010, $801 and $1,276, respectively, of redemption charges were owed to the Managing Owner and are included in “Due to Managing Owner” in the Statements of Financial Condition. The aggregate amount of redemption charges paid to the Managing Owner for the years ended December 31, 2011, 2010, and 2009, were $18,650, $17,207, and $266,979, respectively.

 

4.

DUE FROM/TO BROKERS

 

At December 31, 2011 and 2010, due from and due to brokers balances 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.

 

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 contracts.

 

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 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 by the counterparty. The amount of such credit risk was $32,236,730 and $90,603,180 at December 31, 2011 and 2010, 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 Barclays Capital Inc., Deutsche Bank Securities Inc. (a wholly owned subsidiary of Deutsche Bank AG), J.P. Morgan Securities LLC., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Newedge USA, LLC (a wholly owned subsidiary of Newedge Group which is owned by Société Générale (50%) and Calyon (50%)). For all forward currency transactions, the Trust utilizes three prime brokers, Barclays Bank PLC, Deutsche Bank AG and Morgan Stanley & Co., LLC.

 

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:

 

		December 31,
		2011								2010
		Total Net								Total Net
		Unrealized								Unrealized
		Appreciation				Percent				Appreciation				Percent
Currency Type		(Depreciation)				of Total				(Depreciation)				of Total
Australian dollar		$	1,181,145				9.86	%		$	1,643,420				4.39	%
British pound			268,046				2.24				954,935				2.55
Canadian dollar			793,734				6.63				1,325,243				3.54
Czech koruna			148,481				1.24				(35,527	)			(0.09	)
Euro			3,382,866				28.24				675,680				1.81
Hong Kong dollar			(29,417	)			(0.25	)			301,679				0.81
Hungarian forint			115,728				0.97				(47,422	)			(0.13	)
Japanese yen			2,674,868				22.33				(1,118,237	)			(2.99	)
Korean won			(187,989	)			(1.57	)			1,926,819				5.15
Mexican peso			(537	)			(0.00	)			48,949				0.13
New Zealand dollar			551,053				4.60				(479,061	)			(1.28	)
Norwegian krone			(878,248	)			(7.33	)			1,572,029				4.20
Polish zloty			(29,114	)			(0.24	)			181,184				0.49
Romanian leu			28,100				0.23				5,336				0.02
Singapore dollar			84,101				0.70				173,541				0.46
South African rand			(9,218	)			(0.08	)			384,474				1.03
Swedish krona			(328,241	)			(2.74	)			776,341				2.08
Swiss franc			607,933				5.08				(533,492	)			(1.43	)
Taiwan dollar			(148,333	)			(1.24	)			685,814				1.83
Thai baht			6,878				0.06				16,258				0.04
Turkish lira			(55,283	)			(0.46	)			(1,344,384	)			(3.59	)
U.S. dollar			3,800,552				31.73				30,288,650				80.98
Total		$	11,977,105				100.00	%		$	37,402,229				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, 2011 and 2010 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 nations. 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 guidance. Accordingly, all realized gains and losses as well as any change in net unrealized gains or losses on open positions from the preceding period are recognized as part of the 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, 2011 and 2010. Fair value is presented on a gross basis even though the contracts are subject to master netting agreements and qualify for net presentation in the Statements of Financial Condition.

  

Fair Value of Futures and Forward Currency Contracts at December 31, 2011

 

																		Net Unrealized
		Fair Value - Long Positions								Fair Value - Short Positions								Gain (Loss) on
Sector		Gains				Losses				Gains				Losses				Open Positions
Futures contracts:
Energies		$	20,943			$	(338,884	)		$	1,602,200			$	(24,710	)		$	1,259,549
Grains			740,413				-				-				(2,352,297	)			(1,611,884	)
Interest rates			8,941,748				(490,379	)			15,566				(92,325	)			8,374,610
Livestock			-				-				43,060				(67,770	)			(24,710	)
Metals			184,553				(1,266,925	)			1,913,004				(1,535,573	)			(704,941	)
Softs			6,843				(413,145	)			1,560,188				(153,065	)			1,000,821
Stock indices			-				(36,565	)			968,194				(1,616,534	)			(684,905	)
Total futures contracts			9,894,500				(2,545,898	)			6,102,212				(5,842,274	)			7,608,540
Forward currency contracts			2,688,904				(3,722,609	)			8,706,240				(3,303,970	)			4,368,565
Total futures and  forward currency contracts		$	12,583,404			$	(6,268,507	)		$	14,808,452			$	(9,146,244	)		$	11,977,105

 

Fair Value of Futures and Forward Currency Contracts at December 31, 2010

 

																		Net Unrealized
		Fair Value - Long Positions								Fair Value - Short Positions								Gain on
Sector		Gains				Losses				Gains				Losses				Open Positions
Futures contracts:
Energies		$	3,578,697			$	(604,025	)		$	-			$	(1,326,800	)		$	1,647,872
Grains			6,435,870				-				-				(707,463	)			5,728,407
Interest rates			1,906,539				(446,636	)			93,822				(225,935	)			1,327,790
Livestock			578,540				-				-				(295,000	)			283,540
Metals			10,487,557				-				-				(1,179,968	)			9,307,589
Softs			2,899,490				(6,496	)			17,158				(279,470	)			2,630,682
Stock indices			6,102,368				(1,061,589	)			504,746				(6,570	)			5,538,955
Total futures contracts			31,989,061				(2,118,746	)			615,726				(4,021,206	)			26,464,835
Forward currency contracts			17,229,470				(2,951,060	)			4,884,986				(8,226,002	)			10,937,394
Total futures and  forward currency contracts		$	49,218,531			$	(5,069,806	)		$	5,500,712			$	(12,247,208	)		$	37,402,229

 

 

The effect of trading futures and forward currency contracts is represented on the Statements of Operations for the years ended December 31, 2011, 2010 and 2009 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:

 

Sector		2011				2010				2009
Futures contracts:
Currencies		$	-			$	-			$	12,863
Energies			7,688,026				(6,296,617	)			(20,943,376	)
Grains			(10,817,032	)			14,680,492				(6,699,369	)
Interest rates			74,456,429				78,525,936				(19,513,721	)
Livestock			(2,910,290	)			(531,000	)			2,065,620
Metals			(974,007	)			12,922,817				(11,958,920	)
Softs			(1,791,425	)			7,618,692				(218,950	)
Stock indices			(66,244,167	)			(2,020,460	)			7,916,951
Total futures contracts			(592,466	)			104,899,860				(49,338,902	)
Forward currency contracts			(33,057,050	)			25,264,096				(9,399,089	)
Total futures and forward currency contracts		$	(33,649,516	)		$	130,163,956			$	(58,737,991	)

 

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, 2011, 2010 and 2009. The Trust’s average Net Asset Value during 2011, 2010 and 2009 was approximately and $851,000,000, $866,000,000 and $931,000,000, respectively.

 

		2011								2010								2009
Sector		Long Positions				Short Positions				Long Positions				Short Positions				Long Positions				Short Positions
Futures contracts:
Currencies		$	-			$	-			$	-			$	-			$	-			$	3,320,750
Energies			127,381,359				48,647,953				183,992,274				116,768,010				109,535,870				113,200,422
Grains			53,980,643				40,497,833				57,678,838				40,281,856				22,378,090				53,157,025
Interest rates			1,079,809,596				61,557,330				1,274,911,920				47,891,170				936,859,841				38,825,820
Livestock			5,927,944				7,597,444				16,433,746				5,323,786				-				26,230,698
Metals			81,393,624				40,499,934				115,309,169				11,071,090				52,829,526				39,335,538
Softs			17,865,981				10,367,157				29,206,211				7,135,608				20,257,081				13,534,675
Stock indices			244,479,325				70,839,469				478,292,206				14,482,348				344,334,006				85,714,579
Total futures contracts			1,610,838,472				280,007,120				2,155,824,364				242,953,868				1,486,194,414				373,319,507
Forward currency contracts			714,484,864				292,797,211				876,153,841				358,871,897				473,904,261				200,256,650
Total average notional		$	2,325,323,336			$	572,804,331			$	3,031,978,205			$	601,825,765			$	1,960,098,675			$	573,576,157

 

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 2011, 2010, and 2009. 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.

 

  

7.

FINANCIAL HIGHLIGHTS

 

Per 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 period/year. Weighted average number of units for each Series is detailed below:

 

		Years ended December 31,
		2011				2010				2009				Date of issuance
Series 1			645,173.947	(1)			687,898.790	(1)			753,054.008	(1)			July 23, 2001
Series 2			156.318	(1)			64.584	(2)			n/a				April 1, 2010
Series 3			21,549.160	(1)			5,536.921	(1)			1,322.314	(3)			September 1, 2009
Series 4			532.525	(1)			34.462	(4)			n/a				November 1, 2010

 

(1) January 1 - December 31

(2) April 1 - December 31

(3) September 1 - December 31

(4) November 1 - December 31

  

Returns and ratios are calculated for each Series taken as a whole. 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), management fee (for Series 2 and 3) and profit share allocation arrangements. Net investment loss and total expense ratios have been annualized for reporting periods consisting of less than twelve months.

 

8.

REDEMPTION PAYABLE TO MANAGING OWNER

 

At December 31, 2011 and 2010, redemptions payable of $1,259 and $262,829, respectively, was related to profit share allocated to the Managing Owner at each year-end and redeemed.

 

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