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: September 30, 2013

 

Or

 

¨

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission File Number: 000-54028

 

MILLBURN MULTI-MARKETS FUND L.P. 

(Exact name of registrant as specified in its charter)

 

Delaware		26-4038497
(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)	Smaller reporting company x

 

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 I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

Millburn Multi-Markets Fund L.P.
Financial statements
For the three and nine months ended September 30, 2013 and 2012 (unaudited)
Statements of Financial Condition (a)		3
Statements of Operations (c)		4
Statements of Changes in Partners' Capital (b)		6
Statements of Financial Highlights (c)		7
Notes to Financial Statements		11

 

(a) At September 30, 2013 and December 31, 2012 (unaudited)

 

(b) For the nine months ended September 30, 2013 and 2012 (unaudited)

 

(c) For the three and nine months ended September 30, 2013 and 2012 (unaudited)

 

 

Millburn Multi-Markets Fund L.P.

Statements of Financial Condition (UNAUDITED)

 

		September 30,				December 31,
		2013				2012
ASSETS
Investment in Millburn Multi-Markets Trading L.P. (the "Master Fund")		$	152,895,534			$	228,943,314
Due from the Master Fund			3,581,097				5,596,779
Cash			63,150				1,516,001
TOTAL		$	156,539,781			$	236,056,094
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Capital contributions received in advance		$	63,000			$	1,513,559
Capital withdrawal payable			3,581,097				5,596,779
Due to the Master Fund			150				2,442
Total liabilities			3,644,247				7,112,780
PARTNERS' CAPITAL:
General Partner			3,002,145				3,228,323
Limited Partners:
Series A (156,720.4206 and 181,345.3268 units outstanding)			131,711,948				168,880,502
Series B (14,903.4750 and 20,671.4907 units outstanding)			13,381,941				20,299,372
Series C (5,289.4100 and 36,885.1442 units outstanding)			4,799,500				36,535,117
Total limited partners			149,893,389				225,714,991
Total partners' capital			152,895,534				228,943,314
TOTAL		$	156,539,781			$	236,056,094
NET ASSET VALUE PER UNIT OUTSTANDING
Series A		$	840.43			$	931.26
Series B		$	897.91			$	982.00
Series C		$	907.38			$	990.51

 

See notes to financial statements

 

 

Millburn Multi-Markets Fund L.P.

Statements of Operations (UNAUDITED)

 

		For the three months ended
		September 30,				September 30,
		2013				2012
NET INVESTMENT LOSS ALLOCATED FROM THE MASTER FUND
INCOME — Interest income		$	61,770			$	65,889
Expenses:
Management fees			806,566				1,140,379
Brokerage commissions			208,407				191,288
Selling commissions and platform fees			712,453				847,996
Administrative and operating expenses			215,076				298,934
Custody fee and other expenses			9,166				15,411
Total expenses			1,951,668				2,494,008
Net investment loss allocated from the Master Fund			(1,889,898	)			(2,428,119	)
NET REALIZED AND UNREALIZED GAINS (LOSSES) ALLOCATED FROM THE MASTER FUND
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			1,309,801				(2,754,918	)
Foreign exchange translation			10,752				(23,195	)
Net change in unrealized:
Futures and forward currency contracts			(2,921,021	)			3,330,426
Foreign exchange translation			25,843				(14,879	)
Net gains (losses) from U.S. Treasury notes:
Realized			-				(24,347	)
Net change in unrealized			14,809				39,940
Total net realized and unrealized gains (losses) allocated from the Master Fund			(1,559,816	)			553,027
NET LOSS		$	(3,449,714	)		$	(1,875,092	)

 

(Continued)

 

 

Millburn Multi-Markets Fund L.P.

Statements of Operations (UNAUDITED)

 

		For the nine months ended
		September 30,				September 30,
		2013				2012
NET INVESTMENT LOSS ALLOCATED FROM THE MASTER FUND
INCOME — Interest income		$	238,399			$	225,088
Expenses:
Management fees			2,783,044				3,440,530
Brokerage commissions			763,326				542,447
Selling commissions and platform fees			2,409,837				2,527,076
Administrative and operating expenses			736,696				901,635
Custody fee and other expenses			29,849				40,029
Total expenses			6,722,752				7,451,717
Net investment loss allocated from the Master Fund			(6,484,353	)			(7,226,629	)
NET REALIZED AND UNREALIZED GAINS (LOSSES) ALLOCATED FROM THE MASTER FUND
Net realized losses on closed positions:
Futures and forward currency contracts			(8,550,064	)			(9,932,866	)
Foreign exchange translation			(147,456	)			(72,053	)
Net change in unrealized:
Futures and forward currency contracts			(2,292,073	)			(5,960,973	)
Foreign exchange translation			(3,494	)			(1,397	)
Net gains (losses) from U.S. Treasury notes:
Realized			6,670				(28,432	)
Net change in unrealized			4,121				28,156
Total net realized and unrealized losses allocated from the Master Fund			(10,982,296	)			(15,967,565	)
NET LOSS		$	(17,466,649	)		$	(23,194,194	)

 

See notes to financial statements

 

 

Millburn Multi-Markets Fund L.P.

Statements of Changes in Partners' Capital (UNAUDITED)

For the nine months ended September 30, 2013 and 2012

 

		General				Limited Partners
		Partner				Series A								Series B								Series C								Total
		Amount				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS' CAPITAL — December 31, 2012		$	3,228,323			$	168,880,502				181,345.3268			$	20,299,372				20,671.4907			$	36,535,117				36,885.1442			$	228,943,314
Capital contributions			-				13,604,967				14,767.7910				806,000				830.2949				172,061				172.9573				14,583,028
Capital withdrawals			-				(34,829,897	)			(39,392.6972	)			(6,282,708	)			(6,598.3106	)			(32,051,554	)			(31,768.6915	)			(73,164,159	)
Net income (loss)			(226,178	)			(15,943,624	)			-				(1,440,723	)			-				143,876				-				(17,466,649	)
PARTNERS' CAPITAL — September 30, 2013		$	3,002,145			$	131,711,948				156,720.4206			$	13,381,941				14,903.4750			$	4,799,500				5,289.4100			$	152,895,534
Net Asset Value per Unit at September 30, 2013										$	840.43							$	897.91							$	907.38

 

		General				Limited Partners
		Partner				Series A								Series B								Series C								Total
		Amount				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS' CAPITAL — December 31, 2011		$	3,463,815			$	166,336,096				159,942.5316			$	22,643,903				21,012.8097			$	43,576,009				40,189.9735			$	236,019,823
Capital contributions			-				36,671,052				37,345.5113				4,270,220				4,103.9559				1,859,011				1,803.2102				42,800,283
Capital withdrawals			-				(20,146,519	)			(20,817.4094	)			(3,794,722	)			(3,757.5620	)			(4,795,969	)			(4,666.6803	)			(28,737,210	)
Net loss			(243,766	)			(17,293,543	)			-				(2,080,359	)			-				(3,576,526	)			-				(23,194,194	)
PARTNERS' CAPITAL — September 30, 2012		$	3,220,049			$	165,567,086				176,470.6335			$	21,039,042				21,359.2036			$	37,062,525				37,326.5034			$	226,888,702
Net Asset Value per Unit at September 30, 2012										$	938.21							$	985.01							$	992.93

 

See notes to financial statements

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended September 30, 2013

 

The following information presents per unit operating performance data for each series for the three months ended September 30, 2013.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	858.18			$	912.89			$	921.95
LOSS ALLOCATED FROM THE MASTER FUND:
Net investment loss (1)			(10.40	)			(7.17	)			(6.74	)
Total trading and investing losses (1)			(7.35	)			(7.81	)			(7.83	)
Net loss before profit share allocation from the Master Fund			(17.75	)			(14.98	)			(14.57	)
Profit share allocation from the Master Fund (1) (6)			0.00				0.00				0.00
Net loss from operations after profit share allocation from the Master Fund			(17.75	)			(14.98	)			(14.57	)
NET ASSET VALUE PER UNIT — End of period		$	840.43			$	897.91			$	907.38
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(2.07	)%			(1.64	)%			(1.58	)%
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6)			0.00				0.00				0.00
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(2.07	)%			(1.64	)%			(1.58	)%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			5.06	%			3.31	%			3.06	%
Profit share allocation from the Master Fund (2) (6)			0.00				0.00				0.00
Total expenses			5.06	%			3.31	%			3.06	%
Net investment loss (3) (4) (5)			(4.91	)%			(3.15	)%			(2.90	)%

 

(1)

The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing losses is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

 

(2)

Not annualized.

 

(3)

Annualized.

 

(4)

Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.

 

(5)

Excludes profit share allocation from the Master Fund.

 

(6)

Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

See notes to financial statements

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended September 30, 2012

 

The following information presents per unit operating performance data for each series for the three months ended September 30, 2012.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	946.43			$	989.30			$	996.63
LOSS ALLOCATED FROM THE MASTER FUND:
Net investment loss (1)			(11.48	)			(7.62	)			(7.03	)
Total trading and investing gains (1)			3.26				3.33				3.33
Net loss before profit share allocation from the Master Fund			(8.22	)			(4.29	)			(3.70	)
Profit share allocation from the Master Fund (1) (6)			0.00				0.00				0.00
Net loss from operations after profit share allocation from the Master Fund			(8.22	)			(4.29	)			(3.70	)
NET ASSET VALUE PER UNIT — End of period		$	938.21			$	985.01			$	992.93
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(0.87	)%			(0.43	)%			(0.37	)%
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6)			0.00				0.00				0.00
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(0.87	)%			(0.43	)%			(0.37	)%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.88	%			3.13	%			2.88	%
Profit share allocation from the Master Fund (2) (6)			0.00				0.00				0.00
Total expenses			4.88	%			3.13	%			2.88	%
Net investment loss (3) (4) (5)			(4.77	)%			(3.02	)%			(2.77	)%

 

(1)

The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing losses is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

 

(2)

Not annualized.

 

(3)

Annualized.

 

(4)

Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.

 

(5)

Excludes profit share allocation from the Master Fund.

 

(6)

Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

See notes to financial statements

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the nine months ended September 30, 2013

 

The following information presents per unit operating performance data for each series for the nine months ended September 30, 2013.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	931.26			$	982.00			$	990.51
LOSS ALLOCATED FROM THE MASTER FUND:
Net investment loss (1)			(33.17	)			(22.71	)			(20.95	)
Total trading and investing losses (1)			(57.66	)			(61.38	)			(62.18	)
Net loss before profit share allocation from the Master Fund			(90.83	)			(84.09	)			(83.13	)
Profit share allocation from the Master Fund (1) (6)			0.00				0.00				0.00
Net loss from operations after profit share allocation from the Master Fund			(90.83	)			(84.09	)			(83.13	)
NET ASSET VALUE PER UNIT — End of period		$	840.43			$	897.91			$	907.38
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(9.75	)%			(8.56	)%			(8.39	)%
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6)			0.00				0.00				0.00
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(9.75	)%			(8.56	)%			(8.39	)%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			5.09	%			3.34	%			3.04	%
Profit share allocation from the Master Fund (2) (6)			0.00				0.00				0.00
Total expenses			5.09	%			3.34	%			3.04	%
Net investment loss (3) (4) (5)			(4.93	)%			(3.17	)%			(2.87	)%

 

(1)

The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing losses is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

 

(2)

Not annualized.

 

(3)

Annualized.

 

(4)

Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.

 

(5)

Excludes profit share allocation from the Master Fund.

 

(6)

Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

See notes to financial statements

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the nine months ended September 30, 2012

 

The following information presents per unit operating performance data for each series for the nine months ended September 30, 2012.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	1,039.97			$	1,077.62			$	1,084.25
LOSS ALLOCATED FROM THE MASTER FUND:
Net investment loss (1)			(34.45	)			(22.63	)			(20.87	)
Total trading and investing losses (1)			(67.31	)			(69.98	)			(70.45	)
Net loss before profit share allocation from the Master Fund			(101.76	)			(92.61	)			(91.32	)
Profit share allocation from the Master Fund (1) (6)			0.00				0.00				0.00
Net loss from operations after profit share allocation from the Master Fund			(101.76	)			(92.61	)			(91.32	)
NET ASSET VALUE PER UNIT — End of period		$	938.21			$	985.01			$	992.93
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(9.78	)%			(8.59	)%			(8.42	)%
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6)			0.00				0.00				0.00
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(9.78	)%			(8.59	)%			(8.42	)%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.86	%			3.11	%			2.85	%
Profit share allocation from the Master Fund (2) (6)			0.00				0.00				0.00
Total expenses			4.86	%			3.11	%			2.85	%
Net investment loss (3) (4) (5)			(4.73	)%			(2.98	)%			(2.73	)%

 

(1)

The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing losses is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

 

(2)

Not annualized.

 

(3)

Annualized.

 

(4)

Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.

 

(5)

Excludes profit share allocation from the Master Fund.

 

(6)

Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

 See notes to financial statements

 

 

NOTES TO FINANCIAL STATEMENTS

 

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 Millburn Multi-Markets Fund L.P.’s (the “Partnership”) financial condition at September 30, 2013 and December 31, 2012 and the results of its operations for the three and nine months ended September 30, 2013 and 2012 (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 Partnership’s 2012 annual report included in Form 10-K filed with the Securities and Exchange Commission. The December 31, 2012 information has been derived from the audited financial statements as of December 31, 2012.

 

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

 

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 Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2010 through 2012, 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. The Partnership is treated as a limited partnership for federal and state income tax reporting purposes.

 

There have been no material changes with respect to the Partnership’s critical accounting policies, off-balance sheet arrangements or disclosure of contractual obligations as reported in the Partnership's Annual Report on Form 10-K for the fiscal year 2012.

 

2. INVESTMENT IN MILLBURN MULTI-MARKETS TRADING L.P.

 

The Partnership invests substantially all of its assets in Millburn Multi-Markets Trading L.P. (the “Master Fund”). The Partnership’s ownership percentage of the Master Fund at September 30, 2013 and December 31, 2012 was 63.11% and 68.43%, respectively, of total partners’ capital of the Master Fund. See the attached financial statements of the Master Fund.

 

3. RELATED PARTY TRANSACTIONS

 

The Partnership bears its own expenses, including, but not limited to, periodic legal, accounting and filing fees. Total operating expenses related to investors in the Partnership (including their pro-rata share of Master Fund expenses) are not expected to exceed 1/2 of 1% per annum of the Partnership’s average month-end partners’ capital.

 

During any time in which a third-party administrator is providing services to the Master Fund, as is currently the case, Millburn Ridgefield Corporation (the “General Partner”) is paid a monthly administration fee for administration services it provides calculated as a percentage of the month-end net asset value (prior to reduction for withdrawals or redemptions, management fees, amounts payable to selling agents and the administration fee then being calculated) of the Master Fund equal to 0.05% per annum of the Master Fund’s average net assets. The Partnership is allocated its pro rata portion of the administration fee which is charged at the Master Fund level. As of September 30, 2013 and December 31, 2012, $41,983 and $15,997, respectively, was payable by the Master Fund to the General Partner and is included in “accrued expenses” in the Master Fund’s Statements of Financial Condition.

 

 

The General Partner has paid expenses incurred in connection with the organization of the Partnership and the initial offering of the units of limited partnership (“Units”). The total amount paid by the General Partner was $191,967. The Master Fund, on behalf of the Partnership, is reimbursing the General Partner for these costs in 60 equal monthly installments of $3,199 which began on August 1, 2009. However, to the extent that for any month the $3,199 exceeds 1/12 of 0.05% (0.05% per annum) of the Partnership’s month-end net asset value, such excess will not be reimbursed by the Partnership but will be absorbed by the General Partner. As of September 30, 2013, pursuant to this calculation, $30,987 has been borne by the General Partner and will not be reimbursed by the Partnership. For each of the three and nine months ended September 30, 2013 and 2012, the costs incurred by the Partnership were $9,597 and $28,791, respectively. Organization and initial offering costs are included in “administrative and operating expenses” in the Master Fund’s Statements of Operations. Accordingly, as of September 30, 2013 and December 31, 2012, $15,996 and $9,597, were payable by the Master Fund to the General Partner as reimbursement for such costs and are included in “accrued expenses” in the Master Fund’s Statement of Financial Condition.

 

Series A Unitholders that 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 General Partner. At September 30, 2013 and December 31, 2012, $0 and $2,510 were owed to the General Partner, respectively.

 

4. FINANCIAL HIGHLIGHTS

 

Per Unit operating performance for Series A, Series B and Series C Units is calculated based on Unitholders’ partners’ 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 of each series is detailed below.

 

		Three months ending September 30,								Nine months ending September 30,
		2013				2012				2013				2012
Series A			167,652.875				173,181.708				176,563.183				170,566.934
Series B			16,177.681				22,308.759				17,917.609				22,686.483
Series C			5,684.046				37,455.583				9,567.380				39,280.486

 

 

Millburn Multi-Markets Trading L.P.
Financial statements
For the three and nine months ended September 30, 2013 and 2012 (unaudited)
Statements of Financial Condition (a)		14
Condensed Schedules of Investments (a)		15
Statements of Operations (c)		19
Statements of Changes in Partners' Capital (b)		21
Statements of Financial Highlights (c)		22
Notes to Financial Statements		24

 

(a) At September 30, 2013 and December 31, 2012 (unaudited)

 

(b) For the nine months ended September 30, 2013 and 2012 (unaudited)

 

(c) For the three and nine months ended September 30, 2013 and 2012 (unaudited)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Condition (UNAUDITED)

 

		September 30				December 31
		2013				2012
ASSETS
EQUITY IN TRADING ACCOUNTS:
Investments in U.S. Treasury notes–at fair value (amortized cost $38,370,710 and $57,790,260)		$	38,381,381			$	57,802,756
Net unrealized appreciation on open futures and forward currency contracts			1,911,882				4,087,228
Due from brokers			2,043,445				5,627,293
Cash denominated in foreign currencies (cost $2,318,611 and $4,037,140)			2,370,143				4,058,372
Total equity in trading accounts			44,706,851				71,575,649
INVESTMENTS IN U.S. TREASURY NOTES–at fair value (amortized cost $196,014,696 and $252,630,704)			196,078,256				252,687,230
CASH			10,745,035				17,495,371
ACCRUED INTEREST RECEIVABLE			186,101				1,702,482
DUE FROM MILLBURN MULTI-MARKETS LTD.			1,951				150
DUE FROM MILLBURN MULTI-MARKETS FUND L.P.			150				2,442
TOTAL		$	251,718,344			$	343,463,324
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Net unrealized depreciation on open futures and forward currency contracts		$	2,407,647			$	829,940
Cash denominated in foreign currencies (cost -$0 and -$527,192)			-				531,601
Capital contributions received in advance			-				88,061
Capital withdrawals payable			5,949,918				6,313,976
Management fee payable			322,941				458,893
Selling commissions payable			229,514				296,630
Accrued expenses			459,188				206,798
Due to broker			42,106				96,357
Commissions and other trading fees on open futures contracts			31,275				74,020
Due to General Partner			-				2,510
Total liabilities			9,442,589				8,898,786
PARTNERS' CAPITAL			242,275,755				334,564,538
TOTAL		$	251,718,344			$	343,463,324

 

See notes to financial statements

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments (UNAUDITED)

September 30, 2013

 

FUTURES AND FORWARD CURRENCY CONTRACTS		Net Unrealized Appreciation/ (Depreciation) as a % of Partners' Capital				Net Unrealized Appreciation/ (Depreciation)
FUTURES CONTRACTS
Long futures contracts:
Energies			(0.25	)%		$	(602,171	)
Grains			(0.18	)			(440,263	)
Interest rates:
2 Year U.S. Treasury Note (919 contracts, settlement date December 2013)			0.05				127,234
5 Year U.S. Treasury Note (249 contracts, settlement date December 2013)			0.03				82,844
10 Year U.S. Treasury Note (87 contracts, settlement date December 2013)			0.01				28,172
30 Year U.S. Treasury Bond (83 contracts, settlement date December 2013)			0.02				51,656
Other interest rates			0.45				1,067,675
Total interest rates			0.56				1,357,581
Livestock			0.01				18,090
Metals			(0.01	)			(29,856	)
Softs			0.07				179,346
Stock indices			(1.25	)			(3,041,917	)
Total long futures contracts			(1.05	)			(2,559,190	)
Short futures contracts:
Energies			0.07				171,752
Grains			0.21				514,779
Interest rates			(0.04	)			(109,673	)
Livestock			0.01				14,840
Metals			(0.22	)			(526,092	)
Softs			0.07				172,547
Stock indices			(0.04	)			(86,610	)
Total short futures contracts			0.06				151,543
TOTAL INVESTMENTS IN FUTURES CONTRACTS - Net			(0.99	)			(2,407,647	)
FORWARD CURRENCY CONTRACTS:
Total long forward currency contracts			1.13				2,728,199
Total short forward currency contracts			(0.34	)			(816,317	)
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS - Net			0.79				1,911,882
TOTAL			(0.20	)%		$	(495,765	)

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments (UNAUDITED)

September 30, 2013

 

U.S. TREASURY NOTES

 

Face Amount				Description		Fair Value as a % of Partners' Capital				Fair Value
$	27,240,000			U.S. Treasury notes, 0.500%, 11/15/2013			11.25	%		$	27,256,493
	64,750,000			U.S. Treasury notes, 1.250%, 03/15/2014			26.87				65,106,631
	68,540,000			U.S. Treasury notes, 0.625%, 07/15/2014			28.41				68,826,476
	73,170,000			U.S. Treasury notes, 0.250%, 09/15/2014			30.24				73,270,037
				Total investments in U.S. Treasury notes (amortized cost $234,385,406)			96.77	%		$	234,459,637

 

See notes to financial statements

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2012

 

FUTURES AND FORWARD CURRENCY CONTRACTS		Net Unrealized Appreciation/ (Depreciation) as a % of Partners' Capital				Net Unrealized Appreciation/ (Depreciation)
FUTURES CONTRACTS
Long futures contracts:
Energies			0.42	%		$	1,402,416
Grains			(0.30	)			(996,610	)
Interest rates:
2 Year U.S. Treasury Note (2,580 contracts, settlement date March 2013)			0.03				110,717
5 Year U.S. Treasury Note (1,008 contracts, settlement date March 2013)			0.01				17,273
10 Year U.S. Treasury Note (480 contracts, settlement date March 2013)			(0.03	)			(99,844	)
30 Year U.S. Treasury Bond (165 contracts, settlement date March 2013)			(0.01	)			(30,375	)
Other interest rates			0.39				1,306,819
Total interest rates			0.39				1,304,590
Livestock			(0.04	)			(149,420	)
Metals			0.09				293,489
Softs			0.01				26,112
Stock indices			0.54				1,829,181
Total long futures contracts			1.11				3,709,758
Short futures contracts:
Energies			(0.51	)			(1,699,188	)
Grains			0.22				720,496
Interest rates			0.00				2,288
Livestock			(0.00	)			(7,380	)
Metals			(0.24	)			(816,189	)
Softs			0.05				177,792
Stock indices			(0.03	)			(86,840	)
Total short futures contracts			(0.51	)			(1,709,021	)
TOTAL INVESTMENTS IN FUTURES CONTRACTS - Net			0.60				2,000,737
FORWARD CURRENCY CONTRACTS:
Total long forward currency contracts			(0.05	)			(153,212	)
Total short forward currency contracts			0.42				1,409,763
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS - Net			0.37				1,256,551
TOTAL			0.97	%		$	3,257,288

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2012

 

U.S. TREASURY NOTES

 

Face Amount				Description		Fair Value as a % of Partners' Capital				Fair Value
$	67,740,000			U.S. Treasury notes, 0.625%, 02/28/2013			20.27	%		$	67,800,860
	106,700,000			U.S. Treasury notes, 3.375%, 07/31/2013			32.49				108,696,457
	106,700,000			U.S. Treasury notes, 0.125%, 09/30/2013			31.88				106,674,992
	27,240,000			U.S. Treasury notes, 0.500%, 11/15/2013			8.16				27,317,677
				Total investments in U.S. Treasury notes (amortized cost $310,420,964)			92.80	%		$	310,489,986

 

See notes to financial statements

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED)
 

		For the three months ended
		September 30				September 30
		2013				2012
INVESTMENT INCOME:
Interest income		$	96,251			$	81,715
EXPENSES:
Brokerage commissions			325,086				237,203
Management fees			1,007,535				1,252,520
Selling commissions and platform fees			717,250				860,476
Administrative and operating expenses			289,817				333,634
Custody fees and other expenses			14,087				19,152
Total expenses			2,353,775				2,702,985
NET INVESTMENT LOSS			(2,257,524	)			(2,621,270	)
NET REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			1,980,475				(3,433,598	)
Foreign exchange translation			(19,412	)			(30,359	)
Net change in unrealized:
Futures and forward currency contracts			(4,426,380	)			4,193,118
Foreign exchange translation			76,645				(16,954	)
Net gains (losses) from U.S. Treasury notes
Realized			-				(30,256	)
Net change in unrealized			23,419				49,200
TOTAL NET REALIZED AND UNREALIZED GAINS (LOSSES)			(2,365,253	)			731,151
NET LOSS		$	(4,622,777	)		$	(1,890,119	)

 

(Contined)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED)

 

		For the nine months ended
		September 30				September 30
		2013				2012
INVESTMENT INCOME:
Interest income		$	362,893			$	347,446
EXPENSES:
Brokerage commissions			1,164,360				821,703
Management fees			3,452,319				4,767,005
Selling commissions and platform fees			2,436,833				2,550,026
Administrative and operating expenses			976,069				1,131,401
Custody fees and other expenses			44,832				60,347
Total expenses			8,074,413				9,330,482
NET INVESTMENT LOSS			(7,711,520	)			(8,983,036	)
NET REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized losses on closed positions:
Futures and forward currency contracts			(13,167,406	)			(15,624,192	)
Foreign exchange translation			(261,263	)			(108,788	)
Net change in unrealized:
Futures and forward currency contracts			(3,753,053	)			(11,748,072	)
Foreign exchange translation			34,709				4,688
Net gains (losses) from U.S. Treasury notes
Realized			10,188				(37,060	)
Net change in unrealized			5,209				26,350
TOTAL NET REALIZED AND UNREALIZED LOSSES			(17,131,616	)			(27,487,074	)
NET LOSS			(24,843,136	)			(36,470,110	)
LESS PROFIT SHARE TO GENERAL PARTNER			9,932				-
NET LOSS AFTER PROFIT SHARE TO GENERAL PARTNER		$	(24,853,068	)		$	(36,470,110	)

 

See notes to financial statements

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Changes in Partners' Capital (UNAUDITED)

 

For the nine months ended September 30, 2013:

 

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS' CAPITAL- January 1, 2013		$	332,882,210			$	-			$	1,682,328			$	334,564,538
Contributions			18,125,355				-				-				18,125,355
Withdrawals			(85,571,002	)			-				-				(85,571,002	)
Net loss			(24,727,597	)			(854	)			(114,685	)			(24,843,136	)
General Partner’s allocation - profit share			(9,932	)			9,932				-				-
PARTNERS' CAPITAL- September 30, 2013		$	240,699,034			$	9,078			$	1,567,643			$	242,275,755

 

For the nine months ended September 30, 2012:

 

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS' CAPITAL- January 1, 2012		$	407,700,313			$	-			$	1,801,044			$	409,501,357
Contributions			45,489,286				-				-				45,489,286
Withdrawals			(139,212,160	)			-				-				(139,212,160	)
Net loss			(36,346,713	)			-				(123,397	)			(36,470,110	)
PARTNERS' CAPITAL- September 30, 2012		$	277,630,726			$	-			$	1,677,647			$	279,308,373

 

See notes to financial statements

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Highlights (UNAUDITED)

 

The following information presents financial highlights of a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and an annual profit share of 20% of Trading Profits (as defined in the Limited Partnership Agreement).

 

		For the three months ended								For the nine months ended
		September 30 2013				September 30 2012				September 30 2013				September 30 2012
Total return before General Partner profit share allocation (3)			(1.52	)%			(0.30	)%			(8.20	)%			(8.24	)%
Less: General Partner profit share allocation (3)			0.00				0.00				0.00				0.00
Total return after General Partner profit share allocation (3)			(1.52	)%			(0.30	)%			(8.20	)%			(8.24	)%
Ratios to average net asset value:
Expenses (1) (4)			2.76	%			2.56	%			2.82	%			2.52	%
General Partner profit share allocation (3)			0.00				0.00				0.00				0.00
Total expenses (1)			2.76	%			2.56	%			2.82	%			2.52	%
Net investment loss (1) (2) (4)			(2.60	)%			(2.44	)%			(2.65	)%			(2.39	)%

 

Total returns and the ratios to average net asset value are calculated for a Limited Partner. An individual Limited Partner's total returns and ratios may vary from the above total returns and ratios based on different management fee and General Partner profit share allocation agreements and the timing of contributions and withdrawals.

 

(1)

Includes the Partnership's proportionate share of expenses allocated from the Partnership's operations.

 

(2)

Excludes General Partner profit share allocation and includes interest income.

 

(3)

Not Annualized

 

(4)

Annualized

 

See notes to financial statements

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Highlights (UNAUDITED)

 

The following information presents financial highlights for Limited Partners as a whole.

 

		For the three months ended								For the nine months ended
		September 30				September 30				September 30				September 30
		2013				2012				2013				2012
Total return before General Partner profit share allocation (3)			(1.74	)%			(0.58	)%			(8.86	)%			(8.85	)%
Less: General Partner profit share allocation (3)			0.00				0.00				0.00				0.00
Total return after General Partner profit share allocation (3)			(1.74	)%			(0.58	)%			(8.86	)%			(8.85	)%
Ratios to average net asset value:
Expenses (1) (4)			3.68	%			3.68	%			3.77	%			3.46	%
General Partner profit share allocation (3)			0.00				0.00				0.00				0.00
Total expenses (1)			3.68	%			3.68	%			3.77	%			3.46	%
Net investment loss (1) (2) (4)			(3.52	)%			(3.56	)%			(3.60	)%			(3.33	)%

 

Total returns and the ratios to average net asset value are calculated for a Limited Partner. An individual Limited Partner's total returns and ratios may vary from the above total returns and ratios based on different management fee and General Partner profit share allocation agreements and the timing of contributions and withdrawals.

 

(1)

Includes the Partnership's proportionate share of expenses allocated from the Partnership's operations.

 

(2)

Excludes General Partner profit share allocation and includes interest income.

 

(3)

Not Annualized

 

(4)

Annualized

 

See notes to financial statements

 

 

NOTES TO FINANCIAL STATEMENTS

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Master Fund engages in the speculative trading of futures and forward currency contracts and also acts as a master fund for the Partnership, Millburn Multi-Markets Ltd., a Cayman Islands exempted company (the “Cayman Feeder”) and Millburn Multi-Markets Low Vol. SPC, a Cayman Islands Segregated Portfolio Company (the “Cayman SPC Feeder”).

 

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 the Master Fund’s financial condition at September 30, 2013 (unaudited) and December 31, 2012 and the results of its operations for the three and nine months ended September 30, 2013 and 2012 (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 Master Fund’s annual report for the year ended December 31, 2012 included in the Partnership’s annual report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2012 information has been derived from the audited financial statements as of December 31, 2012. 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.

 

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

 

The Income Taxes topic of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Master Fund recognize in its financial statements the impact of any uncertain tax position. Based on a review of the Master Fund’s open tax years, 2010 through 2012, 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. The Master Fund is treated as a limited partnership for federal and state income tax reporting purposes.

 

2. INVESTORS IN MILLBURN MULTI-MARKETS TRADING L.P.

 

The Partnership and the Cayman Feeder invest substantially all of their assets in the Master Fund, and the Cayman SPC Feeder invests approximately two-thirds of its assets in the Master Fund. At September 30, 2013 and December 31, 2012, the respective ownership percentages of the Master Fund are detailed below. The remaining interests are held by direct investors in the Partnership.

 

		September 30,				December 31,
		2013				2012
Partnership			63.11	%			68.43	%
Cayman Feeder			3.29	%			3.32	%
Cayman SPC Feeder			20.62	%			16.26	%
Total			87.02	%			88.01	%

 

The capital withdrawals payable at September 30, 2013 and December 31, 2012 were $5,949,918 and $6,313,976, respectively, detailed below. There were no redemptions payable to the Cayman SPC Feeder at September 30, 2013 or December 31, 2012.

 

		September 30,				December 31,
		2013				2012
Direct investors (1)		$	2,368,821			$	719,707
Partnership (2)			3,581,097				5,594,269
Total		$	5,949,918			$	6,313,976

 

(1) Includes General Partner redemptions at December 31, 2012 of $249,786

(2) Net of redemption penalty payable at December 31, 2012 of $2,510

 

The Master Fund bears expenses, including, but not limited to, periodic legal, accounting and filing fees, up to an amount equal to 1/4 of 1% per annum of average net assets of the Master Fund (the “Expense Cap”). Amounts subject to the Expense Cap include expenses incurred at the Master Fund and Cayman Feeder level and the Administration Fee due to the General Partner, as general partner of the Master Fund. The General Partner bears any excess over such amounts.

 

 

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 Master Fund separates its investments into two categories: cash instruments and derivative contracts.

 

Cash Instruments. The Master Fund’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. The General Partner does not adjust the quoted price for such instruments, even in situations where the Master Fund holds a large position and a sale could reasonably impact the quoted price.

 

Derivative Contracts. Derivative contracts can be exchange-traded or over-the-counter (“OTC”). Exchange-traded futures contracts are valued based on quoted closing settlement prices and typically fall within Level 1 of the fair value hierarchy.

 

Spot currency contracts are valued based on current market prices (“Spot Price”). Forward currency contracts are valued based on pricing models that consider the Spot Price plus the financing cost or benefit (“Forward Point”). Forward Points from the quotation service providers are generally in periods of one month, two months, three months, nine months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Master Fund may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of months from the date the forward currency contract is being valued to its maturity date (“Months to Maturity”), then identifying the forward currency contracts for the two forward months that are closest to the Months to Maturity (“Forward Month Contracts”). Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.

 

During the three and nine months ended September 30, 2013 and 2012, there were no transfers of assets or liabilities between Level 1 and Level 2. The following tables represent the Master Fund’s investments by hierarchical level as of September 30, 2013 and December 31, 2012 in valuing the Master Fund’s investments at fair value. At September 30, 2013 and December 31, 2012, the Master Fund had no assets or liabilities in Level 3.

 

Financial assets and liabilities at fair value as of September 30, 2013

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	234,459,637			$	-			$	234,459,637
Exchange-traded futures contracts
Energies			(430,419	)			-				(430,419	)
Grains			74,516				-				74,516
Interest rates			1,247,908				-				1,247,908
Livestock			32,930				-				32,930
Metals			(555,948	)			-				(555,948	)
Softs			351,893				-				351,893
Stock indices			(3,128,527	)			-				(3,128,527	)
Total exchange-traded futures contracts			(2,407,647	)			-				(2,407,647	)
Over-the-counter forward currency contracts			-				1,911,882				1,911,882
Total futures and forward currency contracts (2)			(2,407,647	)			1,911,882				(495,765	)
Total financial assets and liabilities at fair value		$	232,051,990			$	1,911,882			$	233,963,872
Per line item in Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in brokers' trading accounts as collateral										$	38,381,381
Investments in U.S. Treasury notes held in custody											196,078,256
Total investments in U.S. Treasury notes										$	234,459,637
(2)
Net unrealized appreciation on forward currency contracts										$	1,911,882
Net unrealized depreciation on futures contracts											(2,407,647	)
Total unrealized depreciation on futures and forward currency contracts										$	(495,765	)

 

 

Financial assets and liabilities at fair value as of December 31, 2012

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	310,489,986			$	-			$	310,489,986
Exchange-traded futures contracts
Energies			(296,772	)			-				(296,772	)
Grains			(276,114	)			-				(276,114	)
Interest rates			1,306,878				-				1,306,878
Livestock			(156,800	)			-				(156,800	)
Metals			(522,700	)			-				(522,700	)
Softs			203,904				-				203,904
Stock indices			1,742,341				-				1,742,341
Total exchange-traded futures contracts			2,000,737				-				2,000,737
Over-the-counter forward currency contracts			-				1,256,551				1,256,551
Total futures and forward currency contracts (2)			2,000,737				1,256,551				3,257,288
Total financial assets and liabilities at fair value		$	312,490,723			$	1,256,551			$	313,747,274
Per line item in Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in brokers' trading accounts as collateral										$	57,802,756
Investments in U.S. Treasury notes held in custody											252,687,230
Total investments in U.S. Treasury notes										$	310,489,986
(2)
Net unrealized appreciation on futures and forward currency contracts										$	4,087,228
Net unrealized depreciation on futures and forward currency contracts											(829,940	)
Total unrealized appreciation on futures and forward currency contracts										$	3,257,288

 

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.

 

In December 2011, FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities” which created 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 agreement. The following tables present gross amounts of assets or liabilities which qualify for offset as presented in the Statements of Financial Condition at September 30, 2013 and December 31, 2012.

 

 

Offsetting of derivative assets and liabilities at September 30, 2013
Assets		Gross amounts of recognized assets				Gross amounts offset in the Statements of Financial Condition				Net amounts of assets presented in the Statements of Financial Condition
Forward currency contracts
Counterparty F		$	1,301,342			$	(343,407	)		$	957,935
Counterparty G			170,605				(16,642	)			153,963
Counterparty H			3,084,260				(2,284,276	)			799,984
Total forward currency contracts			4,556,207				(2,644,325	)			1,911,882
Total assets		$	4,556,207			$	(2,644,325	)		$	1,911,882

 

Liabilities		Gross amounts of recognized liabilities				Gross amounts offset in the Statements of Financial Condition				Net amounts of liabilities presented in the Statements of Financial Condition
Futures contracts
Counterparty A		$	(801,923	)		$	532,953			$	(268,970	)
Counterparty C			(3,544,079	)			2,399,340				(1,144,739	)
Counterparty D			(2,137,809	)			1,143,871				(993,938	)
Total futures contracts			(6,483,811	)			4,076,164				(2,407,647	)
Total liabilities		$	(6,483,811	)		$	4,076,164			$	(2,407,647	)

 

Offsetting of derivative assets and liabilities at December 31, 2012

 

Assets		Gross amounts of recognized assets				Gross amounts offset in the Statements of Financial Condition				Net amounts of assets presented in the Statements of Financial Condition
Futures contracts
Counterparty A		$	711,097			$	(379,852	)		$	331,245
Counterparty B			3,544,066				(2,246,978	)			1,297,088
Counterparty D			1,382,796				(424,990	)			957,806
Total futures contracts			5,637,959				(3,051,820	)			2,586,139
Forward currency contracts
Counterparty F			2,097,368				(596,279	)			1,501,089
Total assets		$	7,735,327			$	(3,648,099	)		$	4,087,228

 

 

Liabilities		Gross amounts of recognized liabilities				Gross amounts offset in the Statements of Financial Condition				Net amounts of liabilities presented in the Statements of Financial Condition
Futures contracts
Counterparty C		$	(2,695,736	)		$	2,400,831			$	(294,905	)
Counterparty E			(665,485	)			374,986				(290,499	)
Total futures contracts			(3,361,221	)			2,775,817				(585,404	)
Forward currency contracts
Counterparty G			(17,311	)			6,174				(11,137	)
Counterparty H			(6,484,028	)			6,250,629				(233,399	)
Total forward currency contracts			(6,501,339	)			6,256,803				(244,536	)
Total liabilities		$	(9,862,560	)		$	9,032,620			$	(829,940	)

 

The Master Fund’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 Master Fund’s open positions and the liquidity of the markets in which it trades.

 

The Master Fund engages in the speculative trading of futures and forward contracts on interest rates, grains, softs, currencies, metals, energies, livestock and stock indices. The following were the primary trading risk exposures of the Master Fund at September 30, 2013, by market sector:

 

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

 

Energies – The Master Fund’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 sector.

 

Interest rates – Interest rate movements directly affect the price of the sovereign bond futures positions held by the Master Fund 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 Master Fund’s profitability. The Master Fund’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 Master Fund also may take positions in futures contracts on the government debt of other nations. The General Partner 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 Master Fund for the foreseeable future.

 

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

 

Stock indices – The Master Fund’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 values 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 Master Fund’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 Master Fund 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 Master Fund’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 September 30, 2013 and December 31, 2012. 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 Master Fund’s Statements of Financial Condition.

 

 

Fair value of futures and forward currency contracts at September 30, 2013

 

																		Net Unrealized Gain (Loss)
		Fair Value - Long Positions								Fair Value - Short Positions								on Open
Sector		Gains				Losses				Gains				Losses				Positions
Futures contracts:
Energies		$	34,953			$	(637,124	)		$	185,955			$	(14,203	)		$	(430,419	)
Grains			13,250				(453,513	)			551,052				(36,273	)			74,516
Interest rates			1,394,785				(37,204	)			-				(109,673	)			1,247,908
Livestock			52,550				(34,460	)			18,960				(4,120	)			32,930
Metals			833,191				(863,047	)			344,599				(870,691	)			(555,948	)
Softs			192,782				(13,436	)			202,651				(30,104	)			351,893
Stock indices			251,436				(3,293,353	)			-				(86,610	)			(3,128,527	)
Total futures contracts			2,772,947				(5,332,137	)			1,303,217				(1,151,674	)			(2,407,647	)
Forward currency contracts			3,965,204				(1,237,005	)			591,003				(1,407,320	)			1,911,882
Total futures and forward currency contracts		$	6,738,151			$	(6,569,142	)		$	1,894,220			$	(2,558,994	)		$	(495,765	)

 

Fair value of futures and forward currency contracts at December 31, 2012

 

																		Net Unrealized Gain (Loss)
		Fair Value - Long Positions								Fair Value - Short Positions								on Open
Sector		Gains				Losses				Gains				Losses				Positions
Futures contracts:
Energies		$	1,475,418			$	(73,002	)		$	11,630			$	(1,710,818	)		$	(296,772	)
Grains			-				(996,610	)			720,496				-				(276,114	)
Interest rates			2,327,068				(1,022,478	)			2,288				-				1,306,878
Livestock			-				(149,420	)			-				(7,380	)			(156,800	)
Metals			506,951				(213,462	)			-				(816,189	)			(522,700	)
Softs			27,532				(1,420	)			581,411				(403,619	)			203,904
Stock indices			2,089,846				(260,665	)			-				(86,840	)			1,742,341
Total futures contracts			6,426,815				(2,717,057	)			1,315,825				(3,024,846	)			2,000,737
Forward currency contracts			3,645,759				(3,798,971	)			3,974,478				(2,564,715	)			1,256,551
Total futures and forward currency contracts		$	10,072,574			$	(6,516,028	)		$	5,290,303			$	(5,589,561	)		$	3,257,288

 

The effect of trading futures and forward currency contracts is represented on the Master Fund’s Statements of Operations for the three and nine months ended September 30, 2013 and 2012 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 and nine months ended September 30, 2013 and 2012 

 

Sector		Three months ended: September 30, 2013				Three months ended: September 30, 2012				Nine months ended: September 30, 2013				Nine months ended: September 30, 2012
Futures contracts:
Energies		$	(329,347	)		$	(4,231,524	)		$	(4,244,943	)		$	(4,247,670	)
Grains			1,510,125				2,717,732				1,702,592				(347,424	)
Interest rates			(1,859,594	)			5,352,758				(18,374,879	)			11,401,277
Livestock			184,380				(118,146	)			(889,150	)			(1,380,850	)
Metals			(5,761,316	)			(3,186,028	)			(1,904,083	)			(6,368,550	)
Softs			(447,178	)			(901,092	)			310,567				(1,052,759	)
Stock indices			4,313,360				1,340,060				14,903,144				(10,583,404	)
Total futures contracts			(2,389,570	)			973,760				(8,496,752	)			(12,579,380	)
Forward currency contracts			(56,335	)			(214,240	)			(8,423,707	)			(14,792,884	)
Total futures and forward currency contracts		$	(2,445,905	)		$	759,520			$	(16,920,459	)		$	(27,372,264	)

 

 

For the three months ended September 30, 2013, the monthly average number of futures contracts bought and sold was 31,895 and 27,153, respectively, and the monthly average notional value of forward currency contracts traded was approximately $1,035,000,000. Over the same period in 2012, the monthly average of futures contracts bought and sold was 22,580 and 20,571, respectively, and the monthly average notional value of forward currency contracts traded was approximately $1,046,000,000.

 

For the nine months ended September 30, 2013, the monthly average number of futures contracts bought and sold was 36,087 and 37,092, respectively, and the monthly average notional value of forward currency contracts traded was approximately $1,274,000,000. Over the same period in 2012, the monthly average of futures contracts bought and sold was 26,121 and 24,835, respectively, and the monthly average notional value of forward currency contracts traded was approximately $1,197,000,000.

 

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 General Partner seeks to minimize credit risk primarily by depositing and maintaining the Master Fund’s assets at financial institutions and trading counterparties which the General Partner believes to be creditworthy. In addition, for OTC forward currency contracts, the Master Fund 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.

 

The Master Fund’s forward currency trading activities are cleared by Deutsche Bank AG (“DB”), Morgan Stanley & Co. LLC (“MS”) and Barclays Bank PLC (“BB”). The Master Fund’s concentration of credit risk associated with DB, MS or BB 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 DB, MS and BB. The amount of such credit risk was $12,030,054 and $32,592,105 at September 30, 2013 and December 31, 2012, respectively.

 

5. PROFIT SHARE

 

The following table indicates the total profit share earned and accrued during the three and nine months ended September 30, 2013. Profit share earned (from Limited Partners’ redemptions) is credited to the New Profit Memo account as defined in the Master Fund’s Agreement of Limited Partnership. There was no profit share earned or accrued for the three and nine months ended September 30, 2012.

 

		Three months ended:				Nine months ended:
		September 30, 2013				September 30, 2013
Profit share earned		$	-			$	9,932
Profit share accrued (1)			-				-
Total profit share		$	-			$	9,932

 

(1)

Included in “Other liabilities” in the Statements of Financial Condition.

 

6. FINANCIAL HIGHLIGHTS

 

Returns and ratios to average capital are calculated based on 1) a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and 20% of Trading Profits (the Tracking Partner) and 2) limited partners’ capital taken as a whole. An individual partner’s return and the computation of such ratios based on the amount of expenses and profit share allocation assessed to an individual partner’s capital account may vary from these ratios based on the timing of capital transactions and differences in individual partner’s management fee, selling commission, platform fee and profit share allocation arrangements. Returns are calculated based on 1) a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and 20% of Trading Profits and 2) limited partners’ capital taken as a whole. An individual partner’s returns may vary from these returns based on the timing of capital transactions and differences in individual partners’ management fee, selling commission, platform fee and profit share allocation arrangements.

 

 

 

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

 

The Partnership invests substantially all of its assets in the Master Fund. Due to the nature of the Master Fund's business, its results of operations depend on the General Partner's ability to recognize and capitalize on trends and other profit opportunities in different sectors of the global capital and commodity markets. The General Partner's investment and trading methods are confidential so that substantially the only information that can be furnished regarding the Master Fund'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 Master Fund, and its past performance is not necessarily indicative of future results. The General Partner believes, however, that there are certain market conditions, for example, markets with strong price trends, in which the Master Fund 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 Partnership should not have a significant impact on its operations, as the Partnership and the Master Fund have no significant capital expenditure or working capital requirements other than for monies to pay trading losses, brokerage commissions and charges. Within broad ranges of capitalization, the General Partner’s trading positions should increase or decrease in approximate proportion to the size of the Master Fund (in which the Partnership participates).

 

The Partnership raises additional capital only through the sale of Units and capital is increased through trading profits (if any). Neither the Partnership nor the Master Fund engages in borrowing.

 

The Master Fund trades futures and forward contracts, and may trade swap, spot and options contracts, on interest rates, commodities, currencies, metals, energy and stock indices. 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 General Partner has procedures in place to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. These procedures primarily focus on (1) real time monitoring of open positions; (2) diversifying positions among various markets; (3) limiting the assets committed as margin or collateral, generally within a range of 5% to 35% of an account’s net assets, though the amount may at any time be 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 General Partner attempts to control credit risk by causing the Partnership to deal exclusively with large, well-capitalized financial institutions as brokers and counterparties.

 

The financial instruments traded by the Master Fund contain varying degrees of off-balance sheet risk whereby changes in the market values of the futures, forward and spot contracts or the Master Fund’s satisfaction of the obligations may exceed the amount recognized in the Statements of Financial Condition of the Master Fund.

 

Due to the nature of the Master Fund’s business, substantially all its assets are represented by cash, cash equivalents and U.S. government obligations, while the Master Fund maintains its market exposure through open futures, forward and spot contract positions.

 

The Master Fund’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 Master Fund’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 Master Fund is assigned a position in the underlying future which is then settled by offset. The Master Fund’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 Master Fund’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 Master Fund’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 Master Fund’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 Master Fund is likely to suffer losses.

 

The Master Fund’s assets are generally held as cash or cash equivalents, including U.S. government securities or securities issued by federal agencies, other Commodity Futures Trading Commission-authorized investments or held in bank or certain other money market instruments (e.g., bankers acceptances and Eurodollar or other time deposits), which are used to margin the Master Fund’s futures, forward and spot 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 Master Fund’s futures, forward and spot trading, the Master Fund’s assets are highly liquid and are expected to remain so. During its operations through September 30, 2013, the Partnership, through its investment in the Master Fund, experienced no meaningful periods of illiquidity in any of the numerous markets traded by the General Partner.

 

 

CRITICAL ACCOUNTING ESTIMATES

 

The Master Fund records its transactions in futures, forward and spot 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 Master Fund on the day with respect to which net assets are being determined. Spot currency contracts are valued based on the Spot Price. Forward currency contracts are valued based on pricing models that consider the Spot Price plus the Forward Points. Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Master Fund may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of Months to Maturity, then identifying the Forward Month Contracts. Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, such as accrual of expenses, that affect the amounts and disclosures reported in the financial statements. Based on the nature of the business and operations of the Partnership, the General Partner believes that the estimates utilized in preparing the Partnership’s financial statements are appropriate and reasonable, however actual results could differ from these estimates. The estimates used do not provide a range of possible results that would require the exercise of subjective judgment. The General Partner further believes that, based on the nature of the business and operations of the Partnership, no other reasonable assumptions relating to the application of the Partnership’s critical accounting estimates other than those currently used would likely result in materially different amounts from those reported.

 

The General Partner has paid expenses incurred in connection with the organization of the Partnership and the initial offering of the Units. The Master Fund, on behalf of the Partnership, is reimbursing the General Partner for these costs in 60 equal monthly installments of $3,199 which began on August 1, 2009. However, to the extent that for any month the $3,199 exceeds 1/12 of 0.05% (0.05% per annum) of the Partnership’s month-end net asset value, such excess will not be reimbursed by the Partnership but will be absorbed by the General Partner. As of September 30, 2013, pursuant to this calculation $30,987 has been borne by the General Partner and will not be reimbursed by the Partnership.

 

RESULTS OF OPERATIONS

 

Due to the nature of the Partnership’s trading, through its investment in the Master Fund, 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.

 

 

Periods ended September 30, 2013

 

  

		Total
		Partners'
		Capital of the
Month Ending:		Partnership
September 30, 2013		$	152,895,534
June 30, 2013			172,491,457
December 31, 2012			228,943,314

 

		Three Months				Nine Months
Change in Partners' Capital		$	(19,595,923	)		$	(76,047,780	)
Percent Change			(11.36	)%			(33.22	)%

 

THREE MONTHS ENDED SEPTEMBER 30, 2013

 

The decrease in the Partnership’s net assets of $19,595,923 was attributable to withdrawals of $18,372,359 and a net loss through its investment in the Master Fund of $3,449,714 which was partially offset by contributions of 2,226,150.

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2013 decreased $333,813 relative to the corresponding period in 2012. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2013, relative to the corresponding period in 2012.

 

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2013 increased $17,119 relative to the corresponding period in 2012. The increase was due mainly to an increase in the in trading volume at the Master Fund, relative to the corresponding period in 2012.

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Selling commissions and platform fees for the three months ended September 30, 2013 decreased $135,543 relative to the corresponding period in 2012. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2013, relative to the corresponding period in 2012.

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2013 decreased $83,858 relative to the corresponding period in 2012. The decrease was due mainly to a decrease in the Partnership’s net asset value during the three months ended September 30, 2013, relative to the corresponding period in 2012.

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2013 decreased $4,119 relative to the corresponding period in 2012. This decrease was due primarily to a decrease in the Partnership’s average net asset value during the three months ended September 30, 2013 relative to the corresponding period in 2012 which was partially offset by an increase in the effective interest rate of U.S. Treasury Notes held by the Partnership through its investment in the Master Fund.

 

For the three months ended September 30, 2013, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized losses of $1,559,816 from trading operations (including foreign exchange transactions and translations). Management fees of $806,566, brokerage commissions of $208,407, selling commissions and platform fees of $712,453, administrative and operating expenses of $215,076 and custody fees and other expenses of $9,166 were paid or accrued. Interest income of $61,770 partially offset the Master Fund expenses allocated to the Partnership resulting in a net loss of $3,449,714.

 

An analysis of the Master Fund’s trading gain (loss) by sector is as follows:

 

		% Gain
Sector		(Loss)
Currencies			0.01	%
Energies			(0.18	)%
Grains			0.59	%
Interest rates			(0.73	)%
Livestock			0.07	%
Metals			(2.21	)%
Softs			(0.16	)%
Stock indices			1.73	%
Trading loss			(0.88	)%

 

NINE MONTHS ENDED SEPTEMBER 30, 2013

 

The decrease in the Partnership’s net assets of $76,047,780 was attributable to withdrawals of $73,164,159 and a net loss through its investment in the Master Fund of $17,466,649 which was partially offset by contributions of $14,583,028.

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Management fees, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2013 decreased $657,486 relative to the corresponding period in 2012. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2013, relative to the corresponding period in 2012.

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2013 increased $220,879 relative to the corresponding period in 2012. The increase was due mainly to an increase in the trading volume at the Master Fund, relative to the corresponding period in 2012.

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Selling commissions and platform fees for the nine months ended September 30, 2013 decreased $117,239 relative to the corresponding period in 2012. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2013, relative to the corresponding period in 2012.

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2013 decreased $164,939 relative to the corresponding period in 2012. The decrease was due mainly to a decrease in the Partnership’s net asset value during the nine months ended September 30, 2013, relative to the corresponding period in 2012.

 

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2013 increased $13,311 relative to the corresponding period in 2012. This increase was due primarily to an increase in the effective interest rate of U.S. Treasury Notes held by the Partnership, through its investment in the Master Fund, which was partially offset by a decrease in the Partnership’s net asset value during the nine months ended September 30, 2013, relative to the corresponding period in 2012.

 

For the nine months ended September 30, 2013, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized losses of $10,982,296 from trading operations (including foreign exchange transactions and translations). Management fees of $2,783,044, brokerage commissions of $763,326, selling commissions and platform fees of $2,409,837, administrative and operating expenses of $736,696 and custody fees and other expenses of $29,849 were paid or accrued. Interest income of $238,399 partially offset the Master Fund expenses allocated to the Partnership resulting in a net loss of $17,466,649.

 

An analysis of the Master Fund’s trading gain (loss) by sector is as follows:

 

		% Gain
Sector		(Loss)
Currencies			(2.92	)%
Energies			(1.53	)%
Grains			0.65	%
Interest rates			(6.02	)%
Livestock			(0.32	)%
Metals			(0.91	)%
Softs			0.06	%
Stock indices			4.66	%
Trading loss			(6.33	)%

 

MANAGEMENT DISCUSSION – 2013

 

Three months ended September 30, 2013

 

The Partnership, through its investment in the Master Fund, posted a loss during the third quarter as gains from trading stock index and grain futures fell short of losses sustained from trading metal, energy, soft commodity and interest rate futures. Trading of currency forwards and livestock futures was essentially flat for the period.

 

Markets participants struggled to balance the impact of improving economic factors with the uncertainty surrounding monetary and fiscal policy in the U.S. and geopolitical risks emanating from the Middle East, especially Syria and Iran.

 

With the U.S. economy continuing to grow, Europe apparently emerging from recession and Chinese growth strengthening in the third quarter, equity markets generally advanced. Hence long positions in U.S., European, Japanese, Australian and South African stock index futures were profitable. A short CBOE VIX trade was also profitable. On the other hand, short positions in Chinese, Korean and Hong Kong Equity indices registered losses and were reversed.

 

Long soybean and soybean meal trades were profitable as Chinese demand increased and weather related factors dampened the supply outlook. A short soybean oil trade was profitable as was a short corn trade that benefitted from an improved USDA forecast. A short wheat trade was unprofitable.

 

Metal prices rose on the better growth outlook and short positions in both precious and industrial metals generated losses.

 

Energy prices were volatile during the quarter due to the heightened then reduced tensions in the Middle East, and to the changing economic outlook. Losses from trading RBOB gasoline, London gas oil, heating oil and natural gas were fractionally larger than the gains from trading crude oil.

 

Interest rates were volatile as uncertainty about U.S. monetary policy ended in September with a surprise “no-taper” decision by the Federal Reserve. Long positions in short-term German, U.S. and Australian instruments and in the JGB were slightly profitable. However, trading of European, Australian and U.K. notes and bonds produced somewhat larger losses.

 

Currency trading was flat as the dollar weakened during the quarter, apparently due to U.S. fiscal and monetary policy uncertainty. Short dollar trades versus the British pound sterling, Swiss franc, Swedish krona, Korean won and New Zealand dollar and long dollar trades against the currencies of Brazil and India were profitable as was a long Euro/short Turkish lira position. These gains were offset, however, by losses from long dollar positions against the currencies of Australia, Canada, Colombia, Japan, Norway, South Africa and Turkey.

 

Finally, trading of soft commodities was marginally negative.

 

Three months ended June 30, 2013

 

The net asset value of the Partnership, through its investment in the Master Fund, declined sharply as losses from trading financial futures, currency forwards and, to a lesser extent, energy futures outdistanced the gains from trading metals. Trading of agricultural commodity futures was nearly flat.

 

Market dynamics shifted dramatically during the second quarter. Global markets were roiled by concerns about the earlier than expected Federal Reserve exit from its quantitative easing program and about slowing Chinese growth amid a credit squeeze sanctioned by the People’s Bank of China.

 

During the first four months of 2013, long interest rate futures positions had been profitable and, in fact, the low yield on the U.S. ten-year note for 2013 was hit on May 2 at 1.63%. Subsequently, however, testimony before Congress by Federal Reserve Chairman Ben Bernanke and comments by several other Federal Reserve officials raised concerns that the quantitative easing policy might be ended or at least tapered off sooner than had previously been expected. In addition, favorable U.S. employment data and housing market statistics and several other solid economic reports pointed to continued U.S. growth. In response, yields on U.S. notes and bonds reversed abruptly and moved sharply higher. There was also a sympathetic move higher in yields on Canadian, European and Australian notes and bonds. Finally, in Japan, the aggressive monetary policy change announced in April seemed to trigger a shift of funds out of Japanese government bonds to Japanese equities or to higher yielding investments offshore which led to rising Japanese Government Bond yields. Sizable losses were suffered on long positions in U.S., German, British, Canadian, Australian and Japanese interest rate futures. By quarter-end, U.S., Australian, Canadian and British long note and bond positions had been reversed to short positions and German note and bond positions were mixed rather than all long. Long positions in short-term interest rate futures for the U.S., Canada, Australia, Germany and the United Kingdom were also unprofitable and were reduced or reversed.

 

Foreign exchange trading was unprofitable. The abrupt upward turn in U.S. interest rates also triggered an upturn in the U.S. dollar, and short dollar trades versus a number of currencies posted losses. A number of commodity currencies fell sharply after Chinese economic reports came in weaker than anticipated, further dampening the growth prospects of those countries. Thus, short dollar trades against the currencies of New Zealand, Australia, Canada and Mexico generated losses and were reduced or reversed. Short U.S. dollar trades against the currencies of Chile, Switzerland, Sweden, Poland and the Euro also were unprofitable and were reduced or reversed. Long Australian dollar trades versus the Euro, Japanese yen and British pound sterling produced losses. Short Euro trades relative to the currencies of Poland, Sweden and Turkey produced losses as did trading the Swiss franc against the Norwegian krone. Meanwhile, long dollar trades against the yen, Indian rupee, Turkish lira and South African rand were profitable. On the other hand, long U.S. dollar trades relative to the pound sterling, Czech koruna and Norwegian krone were unprofitable.

 

 

The threat of an early end to the liquidity from quantitative easing, higher interest rates and worries about slower Chinese growth prompted an equity selloff leading to losses on long equity futures positions. Losses were widespread, including European, Asian, North American and South African indices. A short VIX trade was unprofitable as well. Long positions in Japanese indices were profitable.

 

Energy trading was unprofitable as small short positions in Brent crude oil, WTI crude oil, heating oil and RBOB gasoline registered marginal losses when prices drifted higher in the wake of increasing unrest in the Middle East. Trading of natural gas was unprofitable.

 

Short positions in gold, silver, aluminum, copper and nickel produced profits that far outdistanced losses from trading lead and zinc.

 

Trading of agricultural commodities was marginally unprofitable. Profits from short coffee, sugar soybean oil and cattle positions and from a long soybean position fell short of the losses from a long cotton trade and a short hog trade.

 

Three months ended March 31, 2013

 

The Partnership, through its investment in the Master Fund, produced a profit during the quarter predominantly due to gains from long stock index positions. There was also a fractional gain from trading soft commodity futures. Currency trading was nearly flat. Trading of interest rate, energy, metal, and agricultural commodity futures generated losses.

 

During the quarter, market participants were encouraged by an improvement in U.S. economic conditions, by signs that China’s growth was recovering after having bottomed in the third quarter of 2012, by continued monetary ease worldwide, and by evidence that some grudging progress was being made on the banking and fiscal problems that have plagued developed economies in recent years. At times, however, this enthusiasm was dampened by a variety of factors including: ongoing debate about the future direction of monetary policies and quantitative easing; discussion about the efficacy of continued austerity in the developed world; the possible impact of the U.S. sequestration; talk of political scandals in Spain; labor unrest in Greece; the unexpected Italian election results; and the Cypriot crisis.

 

With U.S. manufacturing, housing and employment data remaining positive, long positions in U.S. equity futures were profitable as was a short position in the VIX index. Long positions in Japanese equity futures were profitable in the wake of the Bank of Japan’s accommodative rhetoric. Long Swedish, German, Dutch, Australian, South African, Singaporean, and Taiwanese equity index trades were also positive. On the other hand, long positions in Italian, Spanish, Chinese, Korean and Hong Kong equity futures produced partially offsetting losses.

 

Currency trading was mixed and marginally positive for the quarter. Long U.S. and Australian dollar trades against the yen were quite profitable as Japan’s leaders forged ahead with promises of monetary accommodation. A long Australian position relative to British Pound Sterling and long U.S. dollar and Euro trades against the South African rand also posted gains. Finally, short Euro trades versus the currencies of Romania, Sweden and Turkey and short U.S. dollar trades versus the currencies of Chile, Mexico and Israel were profitable. On the other hand, short U.S. dollar trades versus the currencies of the United Kingdom, Canada, Colombia, Korea, Singapore, Norway, Poland, Switzerland and the Euro registered losses and were reduced as were short Euro trades against Norway, Poland, Hungary and the Czech Republic.

 

In January when growth prospects brightened and risk aversion dissipated, interest rates rose and long positions in German, U.S., Australian, Canadian, British and French note and bond futures—which had been highly profitable for the last two years—produced losses and were reduced. In late February and March, increasing worry increased the purchase of government securities and the long—though reduced—positions produced profits that fell short of earlier losses. For the quarter, a long JGB trade was profitable. On the other hand, trading of German, British, Canadian, Australian and U.S. interest rate futures was unprofitable.

 

Trading of commodities was fractionally unprofitable. Among soft commodities, short positions in coffee, sugar, and crude palm oil were profitable due to the weight of abundant supplies on price. Also, a long cotton trade produced a gain. Meanwhile, short cocoa and robusta coffee trades posted losses. In grains, the losses from trading corn and the soybean complex outdistanced the gain from a short wheat position. Long cattle and hog positions generated losses and were reversed. Energy prices were volatile during the quarter and the losses from trading crude oil, heating oil and London gas oil were greater than the profits from a long RBOB gasoline position. In metals, the profit from a short aluminum position fell short of the losses from long gold, silver, platinum, zinc, lead and nickel trades.

 

 

Periods ended September 30, 2012

 

 

		Total
		Partners'
		Capital of the
Month Ending:		Partnership
September 30, 2012		$	226,888,702
June 30, 2012			221,338,153
December 31, 2011			236,019,823

 

 

		Three Months				Nine Months
Change in Partners' Capital		$	5,550,549			$	(9,131,121	)
Percent Change			2.51	%			(3.87	)%

 

THREE MONTHS ENDED SEPTEMBER 30, 2012

 

The increase in the Partnership’s net assets of $5,550,549 was attributable to contributions of $17,338,266 which was partially offset by withdrawals of $9,912,625 and a net loss through its investment in the Master Fund of $1,875,092.

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2012 increased $109,695 relative to the corresponding period in 2011. The increase was due to an increase in the average net asset value of the Partnership during the three months ended September 30, 2012, relative to the corresponding period in 2011.

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2012 increased $57,564 relative to the corresponding period in 2011. The increase was due mainly to an increase in the Partnership’s net asset value during the three months ended September 30, 2012 which resulted in higher trading volume, relative to the corresponding period in 2011.

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Selling commissions and platform fees for the three months ended September 30, 2012 increased $128,141 relative to the corresponding period in 2011. The increase was due to an increase in the average net asset value of the Partnership during the three months ended September 30, 2012, relative to the corresponding period in 2011.

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2012 increased $48,793 relative to the corresponding period in 2011. The increase was due mainly to an increase in the Partnership’s net asset value during the three months ended September 30, 2012, relative to the corresponding period in 2011.

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2012 decreased $25,206 relative to the corresponding period in 2011. This decrease was due primarily to a decrease in short-term Treasury yields during the three months ended September 30, 2012 relative to the corresponding period in 2011.

 

For the three months ended September 30, 2012, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized gains of $553,027 from trading operations (including foreign exchange transactions and translations). Management fees of $1,140,379, brokerage commissions of $191,288, selling commissions and platform fees of $847,996, administrative and operating expenses of $298,934 and custody fees and other expenses of $15,411 were paid or accrued. Interest income of $65,889 partially offset the Master Fund expenses allocated to the Partnership resulting in net loss of $1,875,092.

 

An analysis of the Master Fund’s trading gain (loss) by sector is as follows:

 

		% Gain
Sector		(Loss)
Currencies			(0.02	)%
Energies			(1.51	)%
Grains			0.96	%
Interest rates			1.93	%
Livestock			(0.06	)%
Metals			(1.11	)%
Softs			(0.34	)%
Stock indices			0.45	%
Trading gain			0.30	%

 

NINE MONTHS ENDED SEPTEMBER 30, 2012

 

The decrease in the Partnership’s net assets of $9,131,121 was attributable to withdrawals of $28,737,210 and a net loss through its investment in the Master Fund of $23,194,194 which was partially offset by subscriptions of $42,800,283.

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Management fees, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2012 increased $933,013 relative to the corresponding period in 2011. The increase was due to an increase in the average net asset value of the Partnership during the nine months ended September 30, 2012, relative to the corresponding period in 2011.

 

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2012 increased $186,604 relative to the corresponding period in 2011. The increase was due mainly to an increase in the Partnership’s net asset value during the nine months ended September 30, 2012 which resulted in higher trading volume, relative to the corresponding period in 2011.

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Selling commissions and platform fees for the nine months ended September 30, 2012 increased $818,647 relative to the corresponding period in 2011. The increase was due to an increase in the average net asset value of the Partnership during the nine months ended September 30, 2012, relative to the corresponding period in 2011.

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2012 increased $185,582 relative to the corresponding period in 2011. The increase was due mainly to an increase in the Partnership’s average net asset value during the nine months ended September 30, 2012, relative to the corresponding period in 2011.

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2012 decreased $27,160 relative to the corresponding period in 2011. This decrease was due primarily to a decrease in short-term Treasury yields during the nine months ended September 30, 2012 relative to the corresponding period in 2011.

 

For the nine months ended September 30, 2012, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized losses of $15,967,565 from trading operations (including foreign exchange transactions and translations). Management fees of $3,440,530, brokerage commissions of $542,447, selling commissions and platform fees of $2,527,076, administrative and operating expenses of $901,635 and custody fees and other expenses of $40,029 were paid or accrued. Interest income of $225,088 partially offset the Master Fund expenses allocated to the Partnership resulting in net loss after profit share of $23,194,194.

 

An analysis of the Master Fund’s trading gain (loss) by sector is as follows:

 

		% Gain
Sector		(Loss)
Currencies			(3.62	)%
Energies			(1.57	)%
Grains			0.20	%
Interest rates			3.55	%
Livestock			(0.37	)%
Metals			(1.81	)%
Softs			(0.36	)%
Stock indices			(2.56	)%
Trading loss			(6.54	)%

 

MANAGEMENT DISCUSSION – 2012

 

Three months ended September 30, 2012

 

The Partnership, through its investment in the Master Fund, recorded a small trading gain during the quarter as markets struggled to find a persistent direction. Profits from trading interest rate, grain and stock index futures were largely offset by losses from trading energy, metals and soft commodity futures. Currency trading was essentially flat.

 

Market participants had to weigh the deterioration in actual economic facts against additional easing of monetary policies by a variety of central banks. Moreover, they had to grapple with the ability and willingness of fiscal authorities to rein in deficits with appropriate and effective tax and expenditure programs. Economic statistics worldwide indicated negative or slowing growth and stagnant employment levels at best. The one exception was the U.S. where growth, though slow, seemed steady, although employment levels remained depressed. Moreover, official forecasts—from the International Monetary Fund, Organization for Economic Co-Operation and Development, World Bank, Asian Development Bank and others as well as from various national authorities—were uniformly downgraded. In an effort to counter these tendencies, monetary policies have become ever more accommodative. The latest installments on this easing occurred when on September 8, the European Central Bank (“E.C.B“) announced a plan (vigorously opposed by the Bundesbank) to purchase unlimited amounts of government bonds of Spain and other weak European members if these countries would first request assistance from Europe’s bailout funds. On September 13, the Federal Reserve announced another round of quantitative easing (“QE3“). This was followed by the Bank of Japan increasing the size and duration of its asset purchases. And yet, market participants know that unless European policy makers finally fulfill promises concerning banking unification and fiscal policy unification; and unless the U.S. avoids the fiscal cliff and deals with its debt and deficit problems, the monetary efforts will be for naught. All in all, world markets enter the fourth quarter confronted with considerable uncertainty.

 

 

Against this background, long positions in safe haven U.S., German, British, and Japanese government notes and bonds were profitable, as were long positions in short-term interest rate futures. These gains were pared back later in the quarter due to a run-up in interest rates on government debt which suggests that market participants may be concluding that the ongoing deluge of monetary stimulus may be ineffective and eventually inflationary.

 

Stock index futures generated a gain due to long positions in U.S. and South African indices and short positions in the VIX, the so-called “fear index,” which showed a decrease in expected stock market volatility. Meanwhile, trading of Chinese, Korean, Australian, Canadian and Italian indices was unprofitable.

 

Drought in the U.S. drove grain prices sharply higher during much of the quarter and long positions in soybeans, soybean meal, wheat and corn were profitable, even though the gains were scaled back as prices receded from their highs late in the period. A short soybean oil trade lost money and was reversed.

 

Short Brent and WTI crude oil, heating oil, London gas oil and RBOB gasoline trades were unprofitable and closed or reversed to long trades as concerns about developments in the Middle East underpinned prices despite an apparently abundant current supply. Natural gas trading was also somewhat unprofitable.

 

Short positions in industrial metals were unprofitable as demand from the U.S. auto industry and some stock building demand from China outweighed the broader concerns about worldwide growth.

 

Currency trading was volatile. Market sentiment toward the euro and the U.S. dollar was continually in flux. On balance, short euro trades against a variety of currencies were profitable amid rising concern about European Union (“E.U.”) growth. Long positions in Norwegian and Swedish currencies were profitable as the Scandinavian units seemed to become the latest “safe havens”.

 

Short dollar trades versus the currencies of Korea, Singapore, Chile and Turkey were also profitable. On the other hand, long dollar positions versus the euro and the currencies of the United Kingdom., Brazil, India, Japan, Mexico, Poland, Russia and the Czech Republic produced largely offsetting losses.

 

Short positions in cotton, sugar and Arabica coffee, and long trades in Robusta coffee and London sugar were unprofitable and outweighed the gain from a short palm oil trade.

 

Three months ended June 30, 2012

 

The Master Fund was marginally negative during the quarter as gains from trading over the first 89 calendar days of the period were erased on the final trading day of June following a surprise announcement from the latest E.U. economic summit. Gains from interest rate futures trading and, to a lesser extent, from trading non-dollar cross rates and metal futures were offset by losses from trading stock index, energy and grain and livestock futures. Trading of tropical soft commodities was flat.

 

The global recovery, which was not very robust to begin with, displayed signs of additional weakness throughout the April-June period. Banking and sovereign stresses in the Eurozone, highlighted by two Greek elections in two months, increased. Growth in a number of emerging market economies—China, Brazil, and India, for example—disappointed. In the U.S., economic activity decelerated during the first half of the year so that second quarter growth is now expected to register less than 2%. These forces had led to gains on long interest rate positions, long dollar positions, and short energy, metals and soft commodity positions. Then, on June 29, E.U. leaders announced an agreement to moderate conditions on emergency loans to Spanish banks, ease borrowing costs for Spain and Italy, move toward direct recapitalization of European banks with bailout funds, discuss a full E.U. banking union with E.C.B. supervision, advance the fiscal union discussion and discuss a 120 billion euro fund to promote growth. While most of these provisions were anticipatory and not hard facts, the timing of the news—on a Friday before a U.S. holiday on the last trading day of the month and quarter—triggered a strong, albeit ephemeral, response, resulting in a major appreciation of the Euro and other currencies versus the U.S. dollar, a selloff of safe harbor government debt and a strong rise in energy and metal prices. These market moves sent the Partnership’s returns for the quarter from a sizable gain to roughly breakeven.

 

Despite some end of June giveback, the sizable demand for the safest investments drove higher the prices of German, U.S., British, Australian, Canadian and Japanese government note and bond futures, leading to sizable profits on long positions. Indeed the yields on German, U.S. and British ten year notes, among others, fell to post World War II record lows. Measures to ease monetary policy by Brazil, India, China and Australia pointed to growth concerns and further encouraged safe haven demand.

 

As the growth outlook deteriorated, the prices of industrial metals fell and short positions were profitable. Gold prices also fell and a long position generated a loss and was closed and reversed to a short trade.

 

Turning to soft commodities, short positions in cotton and coffee produced a profit, while a long crude palm oil trade, a short cocoa position and trading of sugar generated largely offsetting losses.

 

Short Euro trades versus the Australian dollar and Turkish lire were profitable, as was a long Australian trade against the Swiss franc. U.S. dollar currency trading was fractionally negative for the quarter largely due to U.S. dollar selling in the wake of the June 29 news from Europe. For most of the quarter the U.S. dollar had risen and long dollar positions against the Euro, the currencies of India, Israel, Switzerland, Brazil and the Czech Republic were profitable. Meanwhile, losses were suffered on short dollar trades vis-à-vis the British pound, Australian dollar, Canadian dollar, New Zealand dollar, Chilean peso, Mexican peso, Korean won, Russian ruble, and South African rand. Most of these short dollar positions were reversed to long positions and experienced losses at the end of June. A long dollar position against the yen was unprofitable.

 

 

Energy prices fell against the background of weakening growth and a stronger U.S. dollar, and long positions in crude and crude products produced losses and in most cases were closed or reversed. Those short energy positions sustained losses during the June 29 rally. Natural gas trading was marginally negative.

 

Equity futures prices weakened as first quarter optimism dissipated. Long positions in U.S., Japanese, British, German, Dutch, South African and Australian equity futures produced losses and were reduced and, in some cases, reversed. Those that did reverse suffered June 29 losses also. Short positions in Spanish and Korean equity futures generated smaller profits.

 

Grain prices were quite volatile during the quarter, generally declining through May as crop prospects were encouraging, and then soaring during June as drought struck the U.S. Midwest. Short corn, wheat, Kansas City wheat and Minnesota spring wheat positions produced losses and were reversed to long positions. Long milling wheat and soy meal trades generated some small offsetting profits. Short livestock trades were fractionally negative.

 

Three months ended March 31, 2012

 

The Master Fund registered a loss during the quarter as losses from trading currency forwards, 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 dominated 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, but as these factors receded, 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 Australian dollar, Brazilian real, Columbian 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 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 Aussie 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 E.C.B.’s Long Term Refinancing Operations 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 QE3, 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 E.U. 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 China, Hong Kong, Japan 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 and generated losses on short positions. A short platinum position also was unprofitable as a supply interruption from South Africa boosted prices. Finally, a short silver trade was unprofitable.

 

In the energy markets, long positions in Brent crude, RBOB gasoline, and London gas oil benefited from the general commodity rally and continued stresses from the Middle East and were profitable. The biggest winners in the sector were short positions in U.S. natural gas where the supply boom from fracking and horizontal drilling in shale formations continued to drive prices down.

 

Trading of soft agricultural commodities was fractionally negative. Short grain trades, especially in the soybean complex, were unprofitable as was non-trend trading of grains. 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. A long crude palm oil trade was profitable.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

Neither the Partnership nor the Master Fund engages in off-balance sheet arrangements with other entities.

 

 

CONTRACTUAL OBLIGATIONS

 

Neither the Partnership nor the Master Fund enters into any contractual obligations or commercial commitments to make future payments of a type that would be typical for an operating company or that would affect its liquidity or capital resources. The Partnership’s sole business, through its investment in the Master Fund, is trading futures, forward currency, spot and swap contracts, both long (contracts to buy) and short (contacts to sell). The Partnership, through its investment in the Master Fund, 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 Master Fund for less than four months before being offset or rolled over into new contracts with similar maturities. The financial statements of the Master Fund present a condensed schedule of investments setting forth open futures, forward and other contracts at September 30, 2013 and December 31, 2012.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

 

ITEM 4. CONTROLS AND PROCEDURES

 

The General Partner, with the participation of the principal executive officers and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the 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 General Partner's internal controls over financial reporting during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, the General Partner's internal controls over financial reporting with respect to the Partnership.

 

PART II. OTHER INFORMATION

 

ITEM 1. Legal Proceedings

None.

 

ITEM 1A. Risk Factors

Not required.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

(a) Pursuant to the Partnership's Third Amended and Restated Limited Partnership Agreement, the Partnership may sell Units at the beginning of each calendar month. On July 1, 2013, August 1, 2013 and September 1, 2013 the Partnership sold Units to new and existing limited partners of $1,214,250, $660,000 and $351,900, respectively. There were no underwriting discounts or commissions in connection with the sales of the Units described above.

 

Each of the foregoing units were offered and sold only to “accredited investors” as defined in Rule 501(a) under the Securities Act of 1933 as amended (the “1933 Act”), in reliance on the exemption from registration provided by Rule 506 under the 1933 Act.

 

(c) Pursuant to the Partnership’s Third Amended and Restated Limited Partnership Agreement, Limited Partners may redeem their Units at the end of each calendar month at the then current month-end net asset value. 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 Series A, Series B and Series C Limited Partners during the three months ended September 30, 2013.

 

		Series A								Series B								Series C
Date of Withdrawal		Units Redeemed				NAV per Unit				Units Redeemed				NAV per Unit				Units Redeemed				NAV per Unit
July 31, 2013			6,689.9473			$	853.68				1,324.6610			$	909.41				284.4810			$	918.62
August 31, 2013			8,011.9630				831.83				726.8910				887.43				339.6690				896.60
September 30, 2013			3,821.5027				840.43				337.9926				897.91				72.8657				907.38
Total			18,523.4130								2,389.5446								697.0157

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 

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

 

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

 

 

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,
	General Partner

 

Date: November 14, 2013
	/s/ Tod A. Tanis
	Tod A. Tanis
	Vice-President
	(Principal Accounting Officer)