Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - GLOBAL MACRO TRUST | Financial_Report.xls |
| EX-32.03 - EXHIBIT 32.03 - GLOBAL MACRO TRUST | v310159_ex32-03.htm |
| EX-31.02 - EXHIBIT 31.02 - GLOBAL MACRO TRUST | v310159_ex31-02.htm |
| EX-32.02 - EXHIBIT 32.02 - GLOBAL MACRO TRUST | v310159_ex32-02.htm |
| EX-32.01 - EXHIBIT 32.01 - GLOBAL MACRO TRUST | v310159_ex32-01.htm |
| EX-31.03 - EXHIBIT 31.03 - GLOBAL MACRO TRUST | v310159_ex31-03.htm |
| EX-31.01 - EXHIBIT 31.01 - GLOBAL MACRO TRUST | v310159_ex31-01.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarterly Period Ended: March 31, 2012
or
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 000-50102
| GLOBAL MACRO TRUST |
| (Exact name of registrant as specified in its charter) |
| Delaware | 36-7362830 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
c/o MILLBURN RIDGEFIELD CORPORATION
411 West Putnam Avenue
| Greenwich, Connecticut 06830 |
| (Address of principal executive offices) (Zip code) |
Registrant's telephone number, including area code: (203) 625-7554
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No ¨
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 “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ¨ | Accelerated filer ¨ | |
| Non-accelerated filer (Do not check if a smaller reporting company) x | Smaller reporting company ¨ | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
PART 1. FINANANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Global Macro Trust
Financial statements
For the three months ended March 31, 2012 and 2011 (unaudited)
| Statements of Financial Condition (a) | 1 |
| Condensed Schedules of Investments (a) | 2 |
| Statements of Operations (b) | 6 |
| Statements of Changes in Trust Capital (b) | 7 |
| Statements of Financial Highlights (b) | 9 |
| Notes to the Financial Statements | 10 |
(a) At March 31, 2012 and December 31, 2011 (unaudited)
(b) For the three months ended March 31, 2012 and 2011 (unaudited)
Global Macro Trust
Statements of Financial Condition (UNAUDITED)
| March 31 | December 31 | |||||||
| 2012 | 2011 | |||||||
| ASSETS | ||||||||
| EQUITY IN TRADING ACCOUNTS: | ||||||||
| Investments in U.S. Treasury notes – at fair value (amortized cost $93,937,594 and $81,041,000) | $ | 93,917,668 | $ | 81,045,824 | ||||
| Net unrealized appreciation on open futures and forward currency contracts | 3,333,313 | 12,894,380 | ||||||
| Due from brokers | 10,517,676 | 6,913,738 | ||||||
| Cash denominated in foreign currencies (cost $6,054,147 and $1,754,566) | 6,052,559 | 1,719,017 | ||||||
| Total equity in trading accounts | 113,821,216 | 102,572,959 | ||||||
| INVESTMENTS IN U.S. TREASURY NOTES – at fair value (amortized cost $561,445,026 and $634,052,301) | 561,300,682 | 634,082,662 | ||||||
| CASH AND CASH EQUIVALENTS | 17,283,270 | 42,348,737 | ||||||
| ACCRUED INTEREST RECEIVABLE | 281,895 | 3,339,577 | ||||||
| TOTAL | $ | 692,687,063 | $ | 782,343,935 | ||||
| LIABILITIES AND TRUST CAPITAL | ||||||||
| LIABILITIES: | ||||||||
| Subscriptions by Unitholders received in advance | $ | 3,118,444 | $ | 3,164,450 | ||||
| Net unrealized depreciation on open futures and forward currency contracts | 9,595,700 | 917,275 | ||||||
| Due to Managing Owner | 177,157 | 137,996 | ||||||
| Due to Unitholders | 14,973 | - | ||||||
| Accrued brokerage and commission fees | 3,449,414 | 4,005,466 | ||||||
| Accrued management fees | 52,672 | 57,276 | ||||||
| Redemptions payable to Unitholders | 25,739,982 | 17,618,625 | ||||||
| Redemption payable to Managing Owner | - | 1,259 | ||||||
| Accrued expenses | 187,702 | 180,897 | ||||||
| Cash denominated in foreign currencies (cost $0 and -$2,107,152) | - | 2,122,063 | ||||||
| Due to brokers | 290,305 | 951,234 | ||||||
| Total liabilities | 42,626,349 | 29,156,541 | ||||||
| TRUST CAPITAL | ||||||||
| Managing Owner interest (8,347.266 and 8,207.970 units outstanding) | 9,062,062 | 9,644,943 | ||||||
| Series 1 Unitholders (560,312.763 and 603,996.596 units outstanding) | 608,271,847 | 709,737,394 | ||||||
| Series 2 Unitholders (183.146 and 190.737 units outstanding) | 215,932 | 240,698 | ||||||
| Series 3 Unitholders (26,145.377 and 25,863.120 units outstanding) | 30,971,393 | 32,771,232 | ||||||
| Series 4 Unitholders (1,253.547 and 606.787 units outstanding) | 1,539,480 | 793,127 | ||||||
| Total trust capital | 650,060,714 | 753,187,394 | ||||||
| TOTAL: | $ | 692,687,063 | $ | 782,343,935 | ||||
| NET ASSET VALUE PER UNIT OUTSTANDING: | ||||||||
| Series 1 Unitholders | $ | 1,085.59 | $ | 1,175.07 | ||||
| Series 2 Unitholders | $ | 1,179.02 | $ | 1,261.94 | ||||
| Series 3 Unitholders | $ | 1,184.58 | $ | 1,267.10 | ||||
| Series 4 Unitholders | $ | 1,228.10 | $ | 1,307.09 | ||||
See notes to financial statements
| 1 |
Global Macro Trust
Condensed Schedule of Investments (UNAUDITED)
March 31, 2012
| FUTURES AND FORWARD CURRENCY CONTRACTS | Net Unrealized Appreciation/ (Depreciation) as a % of Trust Capital | Net Unrealized Appreciation/ (Depreciation) | ||||||
| FUTURES CONTRACTS | ||||||||
| Long futures contracts: | ||||||||
| Energies | (0.44 | )% | $ | (2,873,507 | ) | |||
| Grains | 0.01 | 56,250 | ||||||
| Interest rates: | ||||||||
| 2 Year U.S. Treasury Note (683 contracts, settlement date June 2012) | (0.01 | ) | (49,859 | ) | ||||
| 5 Year U.S. Treasury Note (871 contracts, settlement date June 2012) | (0.02 | ) | (123,562 | ) | ||||
| 10 Year U.S. Treasury Note (339 contracts, settlement date June 2012) | (0.01 | ) | (80,969 | ) | ||||
| 30 Year U.S. Treasury Bond (187 contracts, settlement date June 2012) | (0.01 | ) | (67,750 | ) | ||||
| Other interest rates | 0.24 | 1,580,081 | ||||||
| Total interest rates | 0.19 | 1,257,941 | ||||||
| Metals | (0.31 | ) | (1,999,642 | ) | ||||
| Softs | 0.04 | 250,667 | ||||||
| Stock indices | (0.06 | ) | (407,240 | ) | ||||
| Total long futures contracts | (0.57 | ) | (3,715,531 | ) | ||||
| Short futures contracts: | ||||||||
| Energies | 0.46 | 2,969,190 | ||||||
| Grains | (0.07 | ) | (432,584 | ) | ||||
| Interest rates | (0.02 | ) | (129,921 | ) | ||||
| Livestock | 0.01 | 72,090 | ||||||
| Metals | 0.34 | 2,236,219 | ||||||
| Softs | 0.28 | 1,818,638 | ||||||
| Stock indices | 0.08 | 515,212 | ||||||
| Total short futures contracts | 1.08 | 7,048,844 | ||||||
| TOTAL INVESTMENTS IN FUTURES CONTRACTS-Net | 0.51 | 3,333,313 | ||||||
| FORWARD CURRENCY CONTRACTS | ||||||||
| Total long forward currency contracts | (0.30 | ) | (1,993,234 | ) | ||||
| Total short forward currency contracts | (1.17 | ) | (7,602,466 | ) | ||||
| TOTAL INVESTMENTS IN FORWARD CURRENCY | ||||||||
| CONTRACTS-Net | (1.47 | ) | (9,595,700 | ) | ||||
| TOTAL | (0.96 | )% | $ | (6,262,387 | ) | |||
(Continued)
| 2 |
Global Macro Trust
Condensed Schedule of Investments (UNAUDITED)
March 31, 2012
U.S. Treasury Notes
| Face Amount | Description | Fair Value as a % of Trust Capital | Fair Value | |||||||||
| $ | 206,390,000 | U.S. Treasury notes, 0.375%, 08/31/2012 | 31.78 | % | $ | 206,587,522 | ||||||
| 197,140,000 | U.S. Treasury notes, 4.250%, 09/30/2012 | 30.94 | 201,136,705 | |||||||||
| 50,710,000 | U.S. Treasury notes, 0.500%, 11/30/2012 | 7.82 | 50,816,966 | |||||||||
| 195,950,000 | U.S. Treasury notes, 0.625%, 02/28/2013 | 30.25 | 196,677,157 | |||||||||
| Total investments in U.S. Treasury notes | ||||||||||||
| (amortized cost $655,382,620) | 100.79 | % | $ | 655,218,350 | ||||||||
| See notes to financial statements | (Concluded) |
| 3 |
Global Macro Trust
Condensed Schedule of Investments (UNAUDITED)
December 31, 2011
| FUTURES AND FORWARD CURRENCY CONTRACTS | Net Unrealized Appreciation/ (Depreciation) as a % of Trust Capital | Net Unrealized Appreciation/ (Depreciation) | ||||||
| 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)
| 4 |
Global Macro Trust
Condensed Schedule of Investments (UNAUDITED)
December 31, 2011
U.S. Treasury Notes
| Face Amount | Description | Fair Value as a % of Trust Capital | Fair 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) |
| 5 |
Global Macro Trust
Statements of Operations (UNAUDITED)
| For the three months ended | ||||||||
| March 31 | March 31 | |||||||
| 2012 | 2011 | |||||||
| INVESTMENT INCOME: | ||||||||
| Interest income | $ | 266,834 | $ | 692,240 | ||||
| EXPENSES: | ||||||||
| Brokerage and custodial fees | 11,277,869 | 14,517,228 | ||||||
| Administrative expenses | 532,057 | 562,115 | ||||||
| Custody fees and other expenses | 38,616 | 41,296 | ||||||
| Management fees | 160,448 | 100,769 | ||||||
| Total expenses | 12,008,990 | 15,221,408 | ||||||
| NET INVESTMENT LOSS | (11,742,156 | ) | (14,529,168 | ) | ||||
| NET REALIZED AND UNREALIZED GAINS (LOSSES): | ||||||||
| Net realized gains (losses) on closed positions: | ||||||||
| Futures and forward currency contracts | (25,667,890 | ) | 18,004,570 | |||||
| Foreign exchange translation | 85,659 | 5,982 | ||||||
| Net change in unrealized: | ||||||||
| Futures and forward currency contracts | (18,239,492 | ) | (24,453,022 | ) | ||||
| Foreign exchange translation | 48,872 | (88,871 | ) | |||||
| Net gains (losses) from U.S. Treasury notes: | ||||||||
| Realized | (24,513 | ) | 38,951 | |||||
| Net change in unrealized | (199,455 | ) | (109,457 | ) | ||||
| TOTAL NET REALIZED AND UNREALIZED LOSSES | (43,996,819 | ) | (6,601,847 | ) | ||||
| NET LOSS | (55,738,975 | ) | (21,131,015 | ) | ||||
| LESS PROFIT SHARE TO MANAGING OWNER | - | 353 | ||||||
| NET LOSS AFTER PROFIT SHARE TO MANAGING OWNER | $ | (55,738,975 | ) | $ | (21,131,368 | ) | ||
| NET LOSS AFTER PROFIT SHARE TO MANAGING OWNER | ||||||||
| PER UNIT OUTSTANDING | ||||||||
| Series 1 Unitholders | $ | (89.48 | ) | $ | (32.33 | ) | ||
| Series 2 Unitholders | $ | (82.92 | ) | $ | (18.80 | ) | ||
| Series 3 Unitholders | $ | (82.52 | ) | $ | (18.05 | ) | ||
| Series 4 Unitholders | $ | (78.99 | ) | $ | (10.91 | ) | ||
See notes to financial statements
| 6 |
Global Macro Trust
Statements of Changes in Trust Capital (UNAUDITED)
For the three months ended March 31, 2012:
| New Profit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series 1 Unitholders | Series 2 Unitholders | Series 3 Unitholders | Series 4 Unitholders | Memo Account | Managing Owner | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount | Units | Amount | Units | Amount | Units | Amount | Units | Amount | Units | Amount | Units | Amount | Units | |||||||||||||||||||||||||||||||||||||||||||
| Trust capital at | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2012 | $ | 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 | |||||||||||||||||||||||||||||||||||
| Subscriptions | 8,629,420 | 7,536.487 | - | - | 1,755,733 | 1,416.471 | 835,559 | 646.760 | - | - | - | - | 11,220,712 | 9,599.718 | ||||||||||||||||||||||||||||||||||||||||||
| Redemptions | (57,212,948 | ) | (51,623.401 | ) | (9,347 | ) | (7.591 | ) | (1,386,122 | ) | (1,134.214 | ) | - | - | - | - | - | - | (58,608,417 | ) | (52,765.206 | ) | ||||||||||||||||||||||||||||||||||
| Addt'l units allocated * | - | 403.081 | - | - | - | - | - | - | - | - | - | 139.296 | - | 542.377 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | (52,882,019 | ) | - | (15,419 | ) | - | (2,169,450 | ) | - | (89,206 | ) | - | - | - | (582,881 | ) | - | (55,738,975 | ) | - | ||||||||||||||||||||||||||||||||||||
| March 31, 2012 | $ | 608,271,847 | 560,312.763 | $ | 215,932 | 183.146 | $ | 30,971,393 | 26,145.377 | $ | 1,539,480 | 1,253.547 | $ | - | - | $ | 9,062,062 | 8,347.266 | $ | 650,060,714 | 596,242.099 | |||||||||||||||||||||||||||||||||||
| Net asset value per unit outstanding | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| at March 31, 2012: | $ | 1,085.59 | $ | 1,179.02 | $ | 1,184.58 | $ | 1,228.10 | ||||||||||||||||||||||||||||||||||||||||||||||||
| * Additional units are issued to Series 1 Unitholders who are charged less than a 7% brokerage fee and the Managing Owner | (Continued) |
| 7 |
Global Macro Trust
Statements of Changes in Trust Capital (UNAUDITED)
For the three months ended March 31, 2011:
| New Profit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series 1 Unitholders | Series 2 Unitholders | Series 3 Unitholders | Series 4 Unitholders | Memo Account | Managing Owner | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount | Units | Amount | Units | Amount | Units | Amount | Units | Amount | Units | Amount | Units | Amount | Units | |||||||||||||||||||||||||||||||||||||||||||
| Trust capital at | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2011 | $ | 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 | 9,969,224 | 7,613.533 | 30,000 | 22.213 | 8,818,235 | 6,522.761 | 629,822 | 462.463 | - | - | - | - | 19,447,281 | 14,620.970 | ||||||||||||||||||||||||||||||||||||||||||
| Redemptions | (19,969,148 | ) | (15,375.657 | ) | - | - | (148,351 | ) | (109.168 | ) | - | - | - | - | - | - | (20,117,499 | ) | (15,484.825 | ) | ||||||||||||||||||||||||||||||||||||
| Addt'l units allocated * | - | 436.564 | - | - | - | - | - | - | - | 0.001 | - | 141.644 | - | 578.209 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | (20,740,155 | ) | - | (1,837 | ) | - | (298,413 | ) | - | (3,739 | ) | - | (9 | ) | - | (87,215 | ) | (21,131,368 | ) | - | ||||||||||||||||||||||||||||||||||||
| Managing Owner's allocation: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| New Profit-Accrued | - | - | - | - | - | - | - | - | 353 | 0.267 | - | - | 353 | 0.267 | ||||||||||||||||||||||||||||||||||||||||||
| Trust capital at | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2011 | $ | 836,906,613 | 652,896.956 | $ | 130,120 | 97.705 | $ | 22,550,255 | 16,894.695 | $ | 701,532 | 517.696 | $ | 344 | 0.268 | $ | 10,835,514 | 8,453.121 | $ | 871,124,378 | 678,860.411 | |||||||||||||||||||||||||||||||||||
| Net asset value per unit outstanding | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| at March 31, 2011: | $ | 1,281.84 | $ | 1,331.76 | $ | 1,334.75 | $ | 1,355.10 | ||||||||||||||||||||||||||||||||||||||||||||||||
* Additional units are issued to Series 1 Unitholders who are charged less than a 7% brokerage fee and the Managing Owner
| See notes to financial statements | (Concluded) |
| 8 |
Global Macro Trust
Statements of Financial Highlights (UNAUDITED)
| For the three months ended March 31 | 2012 | 2011 | ||||||||||||||||||||||||||||||
| Series 1 | Series 2 | Series 3 | Series 4 | Series 1 | Series 2 | Series 3 | Series 4 | |||||||||||||||||||||||||
| Net loss from operations: | ||||||||||||||||||||||||||||||||
| Net investment loss | $ | (19.32 | ) | $ | (7.33 | ) | $ | (7.36 | ) | $ | (1.36 | ) | $ | (21.83 | ) | $ | (8.27 | ) | $ | (7.46 | ) | $ | (0.72 | ) | ||||||||
| Net realized and unrealized losses on trading of futures and forward currency contracts | (69.81 | ) | (75.22 | ) | (74.78 | ) | (77.19 | ) | (10.40 | ) | (10.42 | ) | (10.43 | ) | (10.04 | ) | ||||||||||||||||
| Net losses from U.S. Treasury obligations | (0.35 | ) | (0.37 | ) | (0.38 | ) | (0.44 | ) | (0.10 | ) | (0.11 | ) | (0.14 | ) | (0.15 | ) | ||||||||||||||||
| Profit share allocated to Managing Owner | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.02 | ) | 0.00 | |||||||||||||||||||||||
| Net loss per unit | $ | (89.48 | ) | $ | (82.92 | ) | $ | (82.52 | ) | $ | (78.99 | ) | $ | (32.33 | ) | $ | (18.80 | ) | $ | (18.05 | ) | $ | (10.91 | ) | ||||||||
| Net asset value per unit, beginning of period | 1,175.07 | 1,261.94 | 1,267.10 | 1,307.09 | 1,314.17 | 1,350.56 | 1,352.80 | 1,366.01 | ||||||||||||||||||||||||
| Net asset value per unit, end of period | $ | 1,085.59 | $ | 1,179.02 | $ | 1,184.58 | $ | 1,228.10 | $ | 1,281.84 | $ | 1,331.76 | $ | 1,334.75 | $ | 1,355.10 | ||||||||||||||||
| Total return and ratios for the three months ended March 31: | 2012 | 2011 | ||||||||||||||||||||||||||||||
| Series 1 | Series 2 | Series 3 | Series 4 | Series 1 | Series 2 | Series 3 | Series 4 | |||||||||||||||||||||||||
| RATIOS TO AVERAGE CAPITAL: | ||||||||||||||||||||||||||||||||
| Net investment loss (a) | (6.92 | )% | (2.68 | )% | (2.43 | )% | (0.43 | )% | (6.72 | )% | (2.46 | )% | (2.22 | )% | (0.21 | )% | ||||||||||||||||
| Total expenses (a) | 7.07 | % | 2.83 | % | 2.58 | % | 0.58 | % | 7.03 | % | 2.77 | % | 2.52 | % | 0.52 | % | ||||||||||||||||
| Profit share allocation (b) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||||||||
| TOTAL
EXPENSES AND PROFIT SHARE ALLOCATION | 7.07 | % | 2.83 | % | 2.58 | % | 0.58 | % | 7.03 | % | 2.77 | % | 2.52 | % | 0.52 | % | ||||||||||||||||
| Total return before profit share allocation (b) | (7.61 | )% | (6.57 | )% | (6.51 | )% | (6.04 | )% | (2.46 | )% | (1.39 | )% | (1.29 | )% | (0.80 | )% | ||||||||||||||||
| Profit share allocation (b) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.04 | ) | 0.00 | |||||||||||||||||||||||
| TOTAL RETURN AFTER PROFIT SHARE ALLOCATION | (7.61 | )% | (6.57 | )% | (6.51 | )% | (6.04 | )% | (2.46 | )% | (1.39 | )% | (1.33 | )% | (0.80 | )% | ||||||||||||||||
(a) annualized
(b) not annualized
See notes to financial statements
| 9 |
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Global Macro Trust’s (the “Trust”) financial condition at March 31, 2012 and December 31, 2011 and the results of its operations for the three months ended March 31, 2012 and 2011 (unaudited). These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Trust's annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2011. The December 31, 2011 information has been derived from the audited financial statements as of December 31, 2011.
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 the Series 1 Units.
The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”) requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.
The Trust enters into contracts that contain a variety of indemnification provisions. The Trust’s maximum exposure under these arrangements is unknown. The Trust does not anticipate recognizing any loss related to these arrangements.
The Income Taxes topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (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, Connecticut and Delaware state jurisdictions and the New York City jurisdiction, there are no uncertain tax positions that would have an impact on the Trust. The Trust is treated as a limited partnership for federal and state income tax reporting purposes and therefore the unitholders in the trust ("Unitholders") are responsible for the payment of taxes.
There have been no material changes with respect to the Trust's critical accounting policies, off-balance sheet arrangements or disclosure of contractual obligations as reported in the Trust's Annual Report on Form 10-K for fiscal year 2011.
2. 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. Millburn Ridgefield Corporation (the “Managing Owner”) is currently evaluating the impact that the standard would have on the financial statements.
3. FAIR VALUE
The Fair Value Measurements and Disclosures topic of the Codification defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The three levels of the fair value hierarchy are described below:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly;
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 Money Market Fund. The Managing Owner 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.
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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 three months ended March 31, 2012 and 2011, there were no transfers of assets or liabilities between Level 1 and Level 2. The following tables represent the Trust’s invesments by hierarchial level as of March 31, 2012 and December 31, 2011 in valuing the Trust’s investments at fair value. At March 31, 2012 and December 31, 2011, the Trust held no assets or liabilities classified in Level 3.
Financial Assets at Fair Value as of March 31, 2012
| Level 1 | Level 2 | Total | ||||||||||
| U.S. Treasury notes (1) | $ | 655,218,350 | $ | - | $ | 655,218,350 | ||||||
| Short-term money market fund* | 16,839,455 | - | 16,839,455 | |||||||||
| Exchange-traded futures contracts | ||||||||||||
| Energies | 95,683 | - | 95,683 | |||||||||
| Grains | (376,334 | ) | - | (376,334 | ) | |||||||
| Interest rates | 1,128,020 | - | 1,128,020 | |||||||||
| Livestock | 72,090 | - | 72,090 | |||||||||
| Metals | 236,577 | - | 236,577 | |||||||||
| Softs | 2,069,305 | - | 2,069,305 | |||||||||
| Stock indices | 107,972 | - | 107,972 | |||||||||
| Total exchange-traded futures contracts | 3,333,313 | - | 3,333,313 | |||||||||
| Over-the-counter forward currency contracts | - | (9,595,700 | ) | (9,595,700 | ) | |||||||
| Total futures and forward currency contracts (2) | 3,333,313 | (9,595,700 | ) | (6,262,387 | ) | |||||||
| Total financial assets at fair value | $ | 675,391,118 | $ | (9,595,700 | ) | $ | 665,795,418 | |||||
| Per line item in the Statements of Financial Condition | ||||||||||||
| (1) | ||||||||||||
| Investments in U.S. Treasury notes held in brokers' trading accounts as collateral | $ | 93,917,668 | ||||||||||
| Investments in U.S. Treasury notes held in custody | 561,300,682 | |||||||||||
| Total investments in U.S. Treasury notes | $ | 655,218,350 | ||||||||||
| (2) | ||||||||||||
| Net unrealized appreciation on futures and forward currency contracts | $ | 3,333,313 | ||||||||||
| Net unrealized depreciation on futures and forward currency contracts | (9,595,700 | ) | ||||||||||
| Total unrealized depreciation on futures and forward currency contracts | $ | (6,262,387 | ) | |||||||||
*The short-term money market fund is included in Cash and Cash Equivalents on the Statements of Financial Condition.
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Financial Assets 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 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.
4. DERIVATIVE INSTRUMENTS
The Derivatives and Hedging topic of the Codification requires qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.
The 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 currencies, energies, grains, interest rates, livestock, metals, softs and stock indices. The following were the primary trading risk exposures of the Trust at March 31, 2012, 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.
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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, 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 an asset position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized appreciation on open futures and forward currency contracts.” Fair values of futures and forward currency contracts in a liability position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized depreciation on open futures and forward currency contracts.” The Trust’s policy regarding fair value measurement is discussed in the Fair Value and Disclosures note, contained herein.
Since the derivatives held or sold by the Trust are for speculative trading purposes, the derivative instruments are not designated as hedging instruments under the provisions of the Derivatives and Hedging guidance. Accordingly, all realized gains and losses, as well as any change in net unrealized gains or losses on open positions from the preceding period, are recognized as part of the Trust’s trading gains and losses in the Statements of Operations.
See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for additional derivative-related information.
The following tables present the fair value of open futures and forward currency contracts, held long or sold short, at March 31, 2012 and December 31, 2011. 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 March 31, 2012
| Net Unrealized | ||||||||||||||||||||
| Fair Value - Long Positions | Fair Value - Short Positions | Gain (Loss) on | ||||||||||||||||||
| Sector | Gains | Losses | Gains | Losses | Open Positions | |||||||||||||||
| Futures contracts: | ||||||||||||||||||||
| Energies | $ | - | $ | (2,873,507 | ) | $ | 2,969,190 | $ | - | $ | 95,683 | |||||||||
| Grains | 58,713 | (2,463 | ) | - | (432,584 | ) | (376,334 | ) | ||||||||||||
| Interest rates | 2,041,772 | (783,831 | ) | - | (129,921 | ) | 1,128,020 | |||||||||||||
| Livestock | - | - | 72,090 | - | 72,090 | |||||||||||||||
| Metals | 175,200 | (2,174,842 | ) | 2,248,850 | (12,631 | ) | 236,577 | |||||||||||||
| Softs | 250,667 | - | 1,818,638 | - | 2,069,305 | |||||||||||||||
| Stock indices | 351,198 | (758,438 | ) | 613,108 | (97,896 | ) | 107,972 | |||||||||||||
| Total futures contracts | 2,877,550 | (6,593,081 | ) | 7,721,876 | (673,032 | ) | 3,333,313 | |||||||||||||
| Forward currency contracts | 3,910,279 | (5,903,513 | ) | 2,716,489 | (10,318,955 | ) | (9,595,700 | ) | ||||||||||||
| Total futures and forward currency contracts | $ | 6,787,829 | $ | (12,496,594 | ) | $ | 10,438,365 | $ | (10,991,987 | ) | $ | (6,262,387 | ) | |||||||
| 13 |
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 | ||||||||
The effect of trading futures and forward currency contracts is represented on the Statements of Operations for the three months ended March 31, 2012 and 2011 as “Net realized gains (losses) on closed positions: Futures and forward currency contracts” and “Net change in unrealized: Futures and forward currency contracts.” These trading gains and losses are detailed below:
Trading gains (losses) of futures and forward currency contracts for the three months ended March 31, 2012 and 2011
| Sector | Three months ended: March 31, 2012 | Three months ended: March 31, 2011 | ||||||
| Futures contracts: | ||||||||
| Energies | $ | 10,412,557 | $ | 24,513,749 | ||||
| Grains | (4,433,664 | ) | (3,282,910 | ) | ||||
| Interest rates | (15,579,211 | ) | (10,735,414 | ) | ||||
| Livestock | (132,070 | ) | 957,680 | |||||
| Metals | (7,292,286 | ) | 3,162,126 | |||||
| Softs | 2,119,527 | 2,003,567 | ||||||
| Stock indices | (9,224,678 | ) | (19,679,883 | ) | ||||
| Total futures contracts | (24,129,825 | ) | (3,061,085 | ) | ||||
| Forward currency contracts | (19,777,557 | ) | (3,387,367 | ) | ||||
| Total futures and forward currency contracts | $ | (43,907,382 | ) | $ | (6,448,452 | ) | ||
The following table presents average notional value by sector in U.S. dollars of open futures and forward currency contracts for the three months ended March 31, 2012 and 2011. The Trust’s average net asset value for the three months ended March 31, 2012 and 2011 was approximately $710,000,000 and $890,000,000, respectively.
| 14 |
Average notional value by sector of futures and forward currency contracts for the three months ended March 31, 2012 and 2011
| 2012 | 2011 | |||||||||||||||
| Sector | Long Positions | Short Positions | Long Positions | Short Positions | ||||||||||||
| Futures contracts: | ||||||||||||||||
| Energies | $ | 85,112,356 | $ | 40,304,045 | $ | 196,497,504 | $ | 52,630,815 | ||||||||
| Grains | 19,541,825 | 36,306,884 | 96,528,751 | 27,872,313 | ||||||||||||
| Interest rates | 1,332,618,330 | 24,095,856 | 559,104,430 | 107,053,103 | ||||||||||||
| Livestock | - | 4,579,130 | 14,819,860 | 1,547,150 | ||||||||||||
| Metals | 26,574,777 | 62,655,627 | 153,567,972 | 13,030,188 | ||||||||||||
| Softs | 7,157,640 | 27,786,050 | 32,902,037 | 3,742,029 | ||||||||||||
| Stock indices | 91,978,360 | 125,441,692 | 479,240,805 | 18,928,946 | ||||||||||||
| Total futures contracts | 1,562,983,288 | 321,169,284 | 1,532,661,359 | 224,804,544 | ||||||||||||
| Forward currency contracts | 269,906,364 | 452,221,381 | 1,061,180,437 | 189,693,768 | ||||||||||||
| Total average notional | $ | 1,832,889,652 | $ | 773,390,665 | $ | 2,593,841,796 | $ | 414,498,312 | ||||||||
Notional values in the interest rate sector were calculated by converting the notional value in local currency of open interest rate futures positions with maturities less than 10 years to 10-year equivalent fixed income instruments and translated to U.S. dollars at March 31, 2012 and 2011. 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.
CONCENTRATION OF CREDIT RISK
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.
The Managing Owner seeks to minimize credit risk primarily by depositing and maintaining the Trust’s assets at financial institutions and trading counterparties which the Managing Owner believes to be creditworthy. In addition, for OTC forward currency contracts, the Trust enters into master netting agreements with its counterparties. Collateral posted at the various counterparties for trading of futures and forward currency contracts includes cash and U.S. Treasury notes.
A significant portion of the Trust’s forward currency trading activities are cleared by Barclays Bank PLC (“BB”), Deutsche Bank AG (“DB”) and Morgan Stanley & Co. LLC (“MS”). The Trust began trading at BB on June 2, 2011. The Trust’s concentration of credit risk associated with BB, DB or MS nonperformance 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 BB, DB and MS. The amount of such credit risk was $41,967,726 and $32,236,730 at March 31, 2012 and December 31, 2011, respectively.
5. PROFIT SHARE
The following table indicates the total profit share earned and accrued during the three months ended March 31, 2012 and 2011. Profit share earned (from Unitholders' redemptions) is credited to the New Profit Memo Account as defined in the Trust’s Declaration of Trust and Trust Agreement (the “Trust Agreement”).
| Three months ended: | ||||||||||
| March 31, 2012 | March 31, 2011 | |||||||||
| Profit share earned | $ | - | $ | 353 | ||||||
| Profit share accrued | - | - | ||||||||
| Total profit share | $ | - | $ | 353 | ||||||
6. RELATED PARTY TRANSACTIONS
The Trust pays all routine expenses, such as legal, accounting, printing, postage and similar administrative expenses (including the Trustee's fees, the charges of an outside accounting services agency and the expenses of updating the Trust's Prospectus), as well as extraordinary costs. At March 31, 2012 and December 31, 2011, the Managing Owner is owed $170,595 and $137,195, respectively, from the Trust in connection with such expenses it has paid on the Trust's behalf (and is included in "Due to Managing Owner" in the Statements of Financial Condition).
Series 1 Unitholders who redeem Units at or prior to the end of the first eleven months after such Units are sold shall be assessed redemption charges calculated based on their redeemed Units' net asset value as of the date of redemption. All redemption charges will be paid to the Managing Owner. At March 31, 2012 and December 31, 2011, $6,562 and $801, respectively, was owed to the Managing Owner (and is included in "Due to Managing Owner" in the Statements of Financial Condition).
| 15 |
7. FINANCIAL HIGHLIGHTS
Per unit operating performance for Series 1, Series 2, Series 3 and Series 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. Weighted average number of Units for each Series is detailed below:
| Three months ending March 31, | |||||||||
| 2012 | 2011 | Date of initial issuance | |||||||
| Series 1 | 596,977.685 | 660,245.605 | July 23, 2001 | ||||||
| Series 2 | 185.687 | 97.682 | April 1, 2010 | ||||||
| Series 3 | 26,228.488 | 14,821.200 | September 1, 2009 | ||||||
| Series 4 | 1,128.562 | 462.617 | November 1, 2010 | ||||||
8. BROKERAGE AND CUSTODIAL FEES
For the three months ended March 31, 2012 and 2011, brokerage and custodial fees were as follows:
| March 31, 2012 | March 31, 2011 | |||||||
| Brokerage fees | 11,277,729 | 14,517,146 | ||||||
| Custodial fees | 140 | 82 | ||||||
| Total | 11,277,869 | 14,517,228 | ||||||
During the three months ended March 31, 2012, amounts paid to selling agents exceed 9.5% of the gross offering proceeds of the Series 1 Units sold. As a result, the amounts that otherwise would be paid to selling agents for that Series 1 Unit were instead rebated to the Trust for the benefit of all holders of Series 1 Units. The total amount rebated to the Trust, $326, was included in “Brokerage and custodial fees” in the Statements of Operations. No amount was rebated to the Trust during the three months ended March 31, 2011.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to Item 1, "Financial Statements." The information contained therein is essential to, and should be read in connection with, the following analysis.
OPERATIONAL OVERVIEW
Due to the nature of the Trust's business, its results of operations depend on the Managing Owner’s ability to recognize and capitalize on trends and other profit opportunities in different sectors of the global capital and commodity markets. The Managing Owner's investment and trading methods are confidential so that substantially the only information that can be furnished regarding the Trust's results of operations is contained in the performance record of its trading. Unlike operating businesses, general economic or seasonal conditions do not directly affect the profit potential of the Trust and its past performance is not necessarily indicative of future results. The Managing Owner believes, however, that there are certain market conditions, for example, markets with strong price trends, in which the Trust has a better likelihood of being profitable than in others.
LIQUIDITY AND CAPITAL RESOURCES
Units 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 Trust should not have a significant impact on its operations, as the Trust 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 Managing Owner’s trading positions should increase or decrease in approximate proportion to the size of the Trust.
The Trust raises additional capital only through the sale of Units and capital is increased through trading profits (if any). The Trust does not engage in borrowing.
The Trust trades futures contracts, and may trade swap and options contracts, on interest rates, 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 OTC 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 most OTC transactions, on the other hand, traders must rely (typically but not universally) 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 OTC markets.
The Managing Owner 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 or collateral, generally within a range of 5% to 35% of an account’s net assets though the amount may at any time 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 not automatically due to an increase in equity from trading profits. The Managing Owner attempts to control credit risk by causing the Trust to deal exclusively with large, well-capitalized financial institutions as brokers and counterparties.
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 contracts or the Trust’s satisfaction of the obligations may exceed the amount recognized in the Statements of Financial Condition of the Trust.
Due to the nature of the Trust’s business, substantially all its assets are represented by cash, cash equivalents and U.S. government obligations while the Trust maintains its market exposure through open futures and forward contract positions.
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The Trust’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 Trust’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 Trust is assigned a position in the underlying future which is then settled by offset. The Trust’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 Trust’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 Trust’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 Trust’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 Trust is likely to suffer losses.
The Trust’s assets are generally held as cash or cash equivalents, including short-term U.S. government obligations, which are used to margin the Trust’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 Trust’s futures and forward trading, the Trust’s assets are highly liquid and are expected to remain so.
During its operations for the three months ended March 31, 2012, the Trust experienced no meaningful periods of illiquidity in any of the numerous markets traded by the Managing Owner.
CRITICAL ACCOUNTING ESTIMATES
The Trust 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 Trust 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 spot prices plus the 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 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. The Managing Owner will also compare the calculated price to the forward currency prices provided by dealers to determine whether the calculated price is fair and reasonable.
RESULTS OF OPERATIONS
Due to the nature of the Trust’s trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.
Series 1 Units, which were initially issued simply as “Units” beginning in July 2001, were the only Series of Units available prior to 2009. Series 2 Units were first issued on April 1, 2010, Series 3 Units were first issued on September 1, 2009 and Series 4 Units were first issued on November 1, 2010. The Trust’s past performance is not necessarily indicative of how it will perform in the future.
Period ended March 31, 2012
| Month Ending: | Total Trust Capital | |||||
| March 31, 2012 | $ | 650,060,714 | ||||
| December 31, 2011 | 753,187,394 | |||||
| Three Months | ||||
| Change in Trust Capital | $ | (103,126,680 | ) | |
| Percent Change | (13.69 | )% | ||
| 17 |
THREE MONTHS ENDED MARCH 31, 2012
The decrease in the Trust’s net assets of $103,126,680 for the three months ended March 31, 2012 was attributable to net loss (before profit share) of $55,738,975 and redemptions of $58,608,417 and was partially offset by subscriptions of $11,220,712.
Brokerage and custodial fees are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Brokerage and custodial fees for the three months ended March 31, 2012 decreased $3,239,359 relative to the corresponding period in 2011 due to a decrease in the Trust’s net assets.
Administrative expenses for the three months ended March 31, 2012 decreased $30,058 relative to the corresponding period in 2011. The decrease was due mainly to a decrease in the Trust's net assets during the three months ended March 31, 2012 relative to the corresponding period.
Interest income is derived from cash and U.S. Treasury instruments held at the Trust's brokers and custodian. Interest income for the three months ended March 31, 2012 decreased $425,406 relative to the corresponding period in 2011. This decrease was due predominantly to a decrease in short-term Treasury yields in addition to a decrease in average net assets.
The Trust experienced net realized and unrealized losses of $43,996,819 from its trading operations (including foreign exchange translations and Treasury obligations). Brokerage and custodial fees of $11,277,869, administrative expenses of $532,057, custody fees and other expenses of $38,616 and management fees of $160,448 were incurred. Interest income of $266,834 partially offset the Trust's expenses resulting in a net loss of $55,738,975. An analysis of the trading gain (loss) by sector is as follows:
| Sector | % Gain (Loss) | |||
| Currencies | (2.73 | )% | ||
| Energies | 1.43 | % | ||
| Grains | (0.60 | )% | ||
| Interest rates | (2.23 | )% | ||
| Livestock | 0.00 | % | ||
| Metals | (0.95 | )% | ||
| Softs | 0.31 | % | ||
| Stock indices | (1.19 | )% | ||
| Trading loss | (5.96 | )% | ||
MANAGEMENT DISCUSSION – 2012
The Trust produced a loss during the quarter as losses from trading currency forwards and interest rates, equities, metals and grains futures overwhelmed gains from trading energies and soft commodities futures. The sentiment of market participants during the quarter was driven by the belief that both the economic outlook and the European debt crisis were improving.
Foreign exchange trading was particularly volatile and unprofitable. Entering the quarter, the U.S. dollar had been trading higher against most currencies based on relative economic strength, financial tumult in Europe and perceived weakening of growth in China. As these factors receded and the U.S. interest rates appeared to be staying negligible for an extended period the U.S. dollar sold off against Central and South American, European and Asian currencies generating losses on long U.S. dollar positions and in many cases bringing a reversal to short U.S. dollar positions. Later, short U.S. dollar trades versus the Brazilian real, Colombian peso and Chilean peso also generated losses. For the Brazilian real in particular, a larger than expected cut in the Brazilian Central Bank’s Selic benchmark interest rate and increased capital controls geared toward weakening the currency undermined the real. Also, a long Japanese yen trade versus the U.S. dollar lost money and was reversed to a short trade after the Japanese yen weakened suddenly following a surprise expansionary move by the Bank of Japan which increased its asset purchase program by $130 billion and set an inflation target for the first time.
Turning to non-U.S. dollar cross rates, long Australian dollar positions against a variety of currencies generated losses when the Australian dollar weakened as slowing growth, rising unemployment and declining inflation statistics combined with forecasts of a Chinese growth slowdown to increase the likelihood that the Reserve Bank of Australia might ease monetary policy. Short euro trades against several currencies were unprofitable as the euro rebounded when the European Central Bank’s longer-term refinancing operation program improved the functioning of financial markets in Europe and as the size of the European rescue fund was substantially raised.
Whether from a reduced need for safety because of an improving economic outlook, particularly in the U.S., from an increased worry about inflation, from a renewed concern about government debt levels or from a reduced likelihood of Quantitative Easing 3 from the Federal Reserve, interest rates rose and long positions in U.S., Australian, Canadian, British and Japanese note and bond futures produced losses.
A first quarter rally in equity markets was rather widespread as market participants responded favorably to an apparent improvement in the global economic outlook, particularly in the U.S. and to progress by the European Union toward resolving their sovereign debt crisis. Long positions in U.S. equity futures were profitable, as was a short CBOE VIX trade that also benefitted from rising equity markets. However, short positions in numerous European and Asian equity indices, especially Japan, China, Hong Kong and Germany, produced even bigger losses.
Industrial metals had been in a sustained downtrend but as pessimism about global growth swung to modest optimism, perhaps prematurely, the metals rallied strongly, generating losses on short positions. A short platinum position also was unprofitable as a supply interruption from South Africa boosted prices.
In the energy markets, long positions in Brent crude, RBOB gasoline, London gas oil and heating oil benefited from the general commodity rally and continued stresses from the Middle East, and as a result were profitable. The biggest winner in the sector was short positions in natural gas where the supply boom from fracking and horizontal drilling in shale formations continues to drive prices down.
Trading of soft agricultural commodities was marginally negative. Short grain trades, especially in the soybean complex, were unprofitable. A short cocoa position was unprofitable as hot, dry weather hit the Ivory Coast and raised fears that an expected bumper crop might face significant damage. Short cotton and rubber trades were also unprofitable when prices rose as pessimism about worldwide growth lifted at least temporarily. A short Arabica coffee trade produced a profit as expectations of a bumper Brazilian harvest pushed Arabica to its lowest price in 18 months in late March.
Period ended March 31, 2011
| Month Ending: | Total Trust Capital | |||||
| March 31, 2011 | $ | 871,124,378 | ||||
| December 31, 2010 | 892,925,611 | |||||
| Three Months | ||||
| Change in Trust Capital | $ | (21,801,233 | ) | |
| Percent Change | (2.44 | )% | ||
THREE MONTHS ENDED MARCH 31, 2011
The decrease in the Trust’s net assets of $21,801,233 for the three months ended March 31, 2011 was attributable to net loss (before profit share) of $21,131,015 and redemptions of $20,117,499 and was partially offset by subscriptions of $19,447,281.
Brokerage fees are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Brokerage fees for the three months ended March 31, 2011 decreased $49,381 relative to the corresponding period in 2010 due to a decrease in the Trust’s average net assets.
Administrative expenses for the three months ended March 31, 2011 decreased $8,105 relative to the corresponding period in 2010. The decrease was due mainly to a decrease in the Trust's net assets during the three months ended March 31, 2011 relative to the corresponding period.
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Interest income is derived from cash and U.S. Treasury instruments held at the Trust's brokers and custodian. Interest income for the three months ended March 31, 2011 decreased $240,233 relative to the corresponding period in 2010. This decrease was due predominantly to a decrease in short-term Treasury yields in addition to a decrease in average net assets.
The Trust experienced net realized and unrealized losses of $6,601,847 from its trading operations (including foreign exchange translations and Treasury obligations). Brokerage fees of $14,517,228, administrative expenses of $562,115, custody fees and other expenses of $41,296, management fees of $100,769 and a profit share of $353 were incurred. Interest income of $692,240 partially offset the Trust's expenses resulting in a net loss after profit share of $21,131,368. An analysis of the trading gain (loss) by sector is as follows:
| Sector |
% Gain (Loss) |
|||
| Currencies | (0.37 | )% | ||
| Energies | 2.75 | % | ||
| Grains | (0.39 | )% | ||
| Interest rates | (1.21 | )% | ||
| Livestock | 0.09 | % | ||
| Metals | 0.35 | % | ||
| Softs | 0.22 | % | ||
| Stock indices | (2.19 | )% | ||
| Trading loss | (0.75 | )% | ||
MANAGEMENT DISCUSSION – 2011
Trading during the quarter was volatile largely as a result of the Japan disaster. There was a loss for the period as profits from energy, U.S. dollar currency, metal and soft commodity trading were outweighed by losses from equity, interest rate and currency cross rate trading.
Through the first two and one-third months of the quarter, generous liquidity creation by developed country central banks, especially the U.S. Federal Reserve, led to a weakening U.S. dollar, and rising equity and commodity prices. Meanwhile, inflation concerns, monetary policy tightening in emerging economies, and persistent worry about government debt problems encouraged interest rates on government securities to rise.
Given the diverse monetary policy stances of the U.S. and emerging economies, capital flowed toward high yield and emerging market exporting countries. Hence, short U.S. dollar positions were profitable as the U.S. dollar fell versus the currencies of Australia, Brazil, Canada, Korea, Mexico, Russia and Scandinavia.
Persistent ease in U.S. monetary policy also led to increasing optimism regarding global economic growth. This environment was favorable to global equities and long positions in index futures in the U.S., Canada, Europe and South Africa were profitable. Asian equities did less well as policy tightening progressed.
The weak U.S. dollar and strong growth outlook supported commodity prices and agricultural commodity, metal and energy trading were all profitable. The agricultural markets were also boosted by supply concerns caused by a variety of weather conditions – too much or too little rain, too hot or not hot enough. Long positions in corn, wheat, cotton, coffee and rubber were profitable.
Energy prices were up on the roiling violence in the Middle East and North Africa, a better economic growth outlook and supply drawdowns. Long positions in crude, heating oil, London gas oil and RBOB gasoline were profitable.
Contrary to some expectations, the U.S. Federal Reserve’s second foray into quantitative easing failed to keep interest rates low. With market participants worried about massive government borrowing requirements and future inflation, there was a substantial uptick in rates and moderate losses were sustained on long interest rate futures positions.
In mid-March, the Japanese earthquake/tsunami/nuclear disaster had a sizable negative impact on these profitable results as market participants altered their prior views, producing significant price reversals.
A flight to safety triggered a strong move into the U.S. dollar which had been falling because of concern regarding fiscal and monetary problems in the U.S., as well as into the Swiss franc and yen which had been weak due to low interest rates. This flight also led to rising prices for “suddenly safe” government securities which had previously been under pressure due to debt problems and recent signs of tighter monetary policies, particularly in Asia. Given the threat to worldwide growth due to the crippling of the Japanese economy, global equity markets, which had weakened noticeably on March 9 in the wake of a Bank of Korea rate hike and further signs of a persistent inflation problem in China, fell sharply as the scale of the disaster expanded. Finally, with Japan’s industrial sector somewhat crippled and global growth now more uncertain, the demands for and prices of metals, energy, and other commodities, which have been experiencing a secular boom, fell, negatively impacting performance.
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The increase in volatility led our risk management systems to reduce positions in order to keep risk in line with intended exposures. Also, price changes produced new signals from directional models that led to position adjustments. Equity exposures were reduced about 50% from earlier levels, although the portfolio remained partially long Asian, U.S., and European indices. In Japan, equity positions were reduced close to flat, as were positions in Japanese government bonds, while the portfolio stayed slightly short the U.S. dollar against the yen. Metal and energy positions stayed long though 10-20% under earlier levels. The portfolio also went somewhat long interest rate futures, particularly Canadian, U.S. and British instruments.
Over the final days of the month, earlier trends resurfaced and much of the Japan related loss was recaptured, but with positions lowered, especially in equities, the quarter finished slightly negative.
OFF-BALANCE SHEET ARRANGEMENTS
The Trust does not engage in off-balance sheet arrangements with other entities.
CONTRACTUAL OBLIGATIONS
The Trust does not enter into 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 Trust’s sole business is trading futures and forward contracts, both long (contracts to buy) and short (contacts to sell). The Trust may also engage in trading swaps. All such contracts are settled by offset, not delivery. Substantially all such contracts are for settlement within four months of the trade date and substantially all such contracts are held by the Trust for less than four months before being offset or rolled over into new contracts with similar maturities. The Trust’s financial statements present a Condensed Schedule of Investments setting forth net unrealized appreciation (depreciation) of the Trust’s open futures and forward currency contracts, both long and short, at March 31, 2012.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Value at Risk is a measure of the maximum amount which the Trust could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Trust's speculative trading and the occurrence in the markets traded by the Trust of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated or the Trust's experience to date (i.e., "risk of ruin"). In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the Trust's losses in any market sector will be limited to Value at Risk or by the Trust's attempts to manage its market risk.
Materiality, as used in this section "Quantitative and Qualitative Disclosures About Market Risk," is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, optionality and multiplier features of the Trust's market sensitive instruments.
Quantifying the Trust's Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Trust's market risk exposures contain "forward-looking statements" within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.
The Trust's risk exposure in the various market sectors traded by the Managing Owner is quantified below in terms of Value at Risk. Due to the Trust's mark- to-market accounting, any loss in the fair value of the Trust's open positions is directly reflected in the Trust's earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).
Exchange maintenance margin requirements have been used by the Trust as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed 95-99% of the maximum one-day losses in the fair value of any given contract incurred during the time period over which historical price fluctuations are researched for purposes of establishing margin levels. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.
The Trust calculates Value at Risk for forward currency contracts that are not exchange traded using exchange maintenance margin requirements for equivalent or similar futures positions as the measure of Value at Risk.
In quantifying the Trust’s Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine each trading category’s aggregate Value at Risk. The diversification effects resulting from the fact that the Trust’s positions are rarely, if ever, 100% positively correlated have not been reflected.
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The Trust's Trading Value at Risk in Different Market Sectors
The following table indicates the average, highest and lowest amounts of trading Value at Risk associated with the Trust's open positions by market category for the quarter ended March 31, 2012. During the three months ended March 31, 2012, the Trust's average total capitalization was approximately $710,000,000.
| Sector | Average Value at Risk | % of Average Capitalization | Highest Value at Risk | Lowest Value at Risk | ||||||||||||
| Currencies | 20.6 | 2.9 | % | 20.6 | 20.6 | |||||||||||
| Energies | 9.4 | 1.3 | % | 9.4 | 9.4 | |||||||||||
| Grains | 3.1 | 0.4 | % | 3.1 | 3.1 | |||||||||||
| Interest rates | 22.1 | 3.1 | % | 22.1 | 22.1 | |||||||||||
| Livestock | 0.1 | 0.0 | % | 0.1 | 0.1 | |||||||||||
| Metals | 6.2 | 0.9 | % | 6.2 | 6.2 | |||||||||||
| Softs | 2.8 | 0.4 | % | 2.8 | 2.8 | |||||||||||
| Stock indices | 23.6 | 3.3 | % | 23.6 | 23.6 | |||||||||||
| Total | 87.9 | 12.3 | % | 87.9 | 87.9 | |||||||||||
Average, highest and lowest Value at Risk amounts relate to the quarter-end amounts for the three months ended March 31, 2012. Average capitalization is the Trust's capitalization at the end of the three months ended March 31, 2012. Dollar amounts represent millions of dollars.
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Trust is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally range between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Trust. The magnitude of the Trust’s open positions creates a “risk of ruin” not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Trust to incur severe losses over a short period of time. The foregoing Value at Risk table — as well as the past performance of the Trust — give no indication of this “risk of ruin.”
Non-Trading Risk
The Trust has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as any market risk they represent) are immaterial.
The Trust also has non-trading cash flow risk as a result of holding a substantial portion (approximately 90%) of its assets in U.S. Treasury notes and other short-term debt instruments (as well as any market risk they represent) for margin and cash management purposes. Although the Managing Owner does not anticipate that, even in the case of major interest rate movements, the Trust would sustain a material mark-to-market loss on its securities positions, if short-term interest rates decline so will the Trust’s cash management income. The Trust also maintains a portion (over 5%) of its assets in cash and in a U.S. government securities and related instruments money market fund. These cash balances are also subject (as well as any market risk they represent) to cash flow risk, which is not material.
Qualitative Disclosures
There have been no material changes in the qualitative disclosures about market risk since the end of the preceding fiscal year.
ITEM 4. CONTROLS AND PROCEDURES
The Managing Owner, with the participation of its Co-Chief Executive Officers and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Trust as of the end of the period covered by this quarterly report, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective. There were no changes in the Managing Owner’s internal control over financial reporting during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Managing Owner’s internal control over financial reporting with respect to the Trust.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
| 21 |
ITEM 1A. RISK FACTORS
There are no material changes from risk factors as previously disclosed in Form 10-K, filed March 30, 2012.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND THE USE OF PROCEEDS
| (a) | There have been no sales of unregistered securities of the Trust during the three months ended March 31, 2012. |
| (c) | Pursuant to the Trust Agreement, Unitholders may redeem their Units at the end of each calendar month at the then current month-end net asset value per Unit. The redemption of Units has no impact on the value of Units that remain outstanding and Units are not reissued once redeemed. |
The following table summarizes the redemptions by Unitholders during the three months ended March 31, 2012. There were no redemptions during the three months ended March 31, 2012 by Series 4 Unitholders.
| Series 1 | Series 2 | Series 3 | ||||||||||||||||||||||||
| Date of Redemption | Units Redeemed | NAV per Unit | Units Redeemed | NAV per Unit | Units Redeemed | NAV per Unit | ||||||||||||||||||||
| January 31, 2012 | 7,796.073 | $ | 1,142.26 | 7.591 | $ | 1,231.39 | 795.741 | $ | 1,236.69 | |||||||||||||||||
| February 29, 2012 | 20,445.633 | 1,121.26 | - | 1,213.28 | 31.851 | 1,218.75 | ||||||||||||||||||||
| March 31, 2012 | 23,381.695 | 1,085.59 | - | 1,179.02 | 306.622 | 1,184.58 | ||||||||||||||||||||
| Total | 51,623.401 | 7.591 | 1,134.214 | |||||||||||||||||||||||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not required.
ITEM 5. OTHER INFORMATION
None.
| 22 |
ITEM 6. EXHIBITS
The following exhibits are included herewith:
31.01 Rule 13(a)-14(a)/15(d)-14(a) Certification of Co-Chief Executive Officer
31.02 Rule 13(a)-14(a)/15(d)-14(a) Certification of Co-Chief Executive Officer
31.03 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer
32.01 Section 1350 Certification of Co-Chief Executive Officer
32.02 Section 1350 Certification of Co-Chief Executive Officer
32.03 Section 1350 Certification of Chief Financial Officer
SIGNATURES
Pursuant to the requirements 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.
| By: | Millburn Ridgefield Corporation, |
| Managing Owner |
| Date: May 14, 2012 | ||
| /s/Tod A. Tanis | ||
| Tod A. Tanis | ||
| Vice-President | ||
| (Principal Accounting Officer) | ||
| 23 |