UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM 10-Q

 

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

 

For the Quarterly Period Ended: June 30, 2017

 

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 ☒   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 ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company”, and “emerging growth 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 ☒
	Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Yes ☐           No ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐   No ☒

 

 

PART I. FINANANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS

 

Millburn Multi-Markets Fund L.P.
Financial statements
For the three and six months ended June 30, 2017 and 2016 (unaudited)
Statements of Financial Condition (a)		1
Statements of Operations (c)		2
Statements of Changes in Partners’ Capital (b)		4
Statements of Financial Highlights (c)		5
Notes to Financial Statements		9

 

(a) At June 30, 2017 and December 31, 2016 (unaudited)

 

(b) For the six months ended June 30, 2017 and 2016 (unaudited)

 

(c) For the three and six months ended June 30, 2017 and 2016 (unaudited)

 

 

Millburn Multi-Markets Fund L.P. 

Statements of Financial Condition (UNAUDITED)

		June 30, 2017				December 31, 2016
ASSETS
Investment in Millburn Multi-Markets
Trading L.P. (the “Master Fund”)		$	178,182,813			$	172,886,333
Due from the Master Fund			975,170				2,876,148
Cash and cash equivalents			1,977,298				2,119,000
Total assets		$	181,135,281			$	177,881,481
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Capital contributions received in advance		$	1,977,000			$	2,119,000
Capital withdrawal payable to Limited Partners			975,170				2,076,148
Capital withdrawal payable to General Partner			—				800,000
Due to the Master Fund			298				—
Total liabilities			2,952,468				4,995,148
PARTNERS’ CAPITAL:
General Partner			2,779,838				2,779,224
Limited partners:
Series A (148,784.1603 and 140,590.2950 units outstanding)			164,656,969				158,782,193
Series B (6,863.5287 and 7,017.8811 units outstanding)			8,555,049				8,846,058
Series C (1,723.5124 and 1,930.6399 units outstanding)			2,190,957				2,478,858
Total limited partners			175,402,975				170,107,109
Total partners’ capital			178,182,813				172,886,333
TOTAL		$	181,135,281			$	177,881,481
NET ASSET VALUE PER UNIT OUTSTANDING:
Series A		$	1,106.68			$	1,129.40
Series B		$	1,246.45			$	1,260.50
Series C		$	1,271.22			$	1,283.96

 

See notes to financial statements (Unaudited)

 

 

 Millburn Multi-Markets Fund L.P. 

Statements of Operations (UNAUDITED)

 

		For the three months ended
		June 30, 2017				June 30, 2016
INVESTMENT INCOME:
Interest income (allocated from the Master Fund)		$	345,184			$	115,296
EXPENSES:
Management fees			916,282				670,347
Brokerage commissions (allocated from the Master Fund)			137,663				84,437
Selling commissions and platform fees			855,366				608,626
Administrative and operating expenses			131,013				171,906
Custody fees and other expenses (allocated from the Master Fund)			8,487				6,175
Total expenses			2,048,811				1,541,491
NET INVESTMENT LOSS			(1,703,627	)			(1,426,195	)
REALIZED AND UNREALIZED GAINS (LOSSES) ALLOCATED FROM THE MASTER FUND
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			6,111,486				8,230,920
Foreign exchange translation			(13,462	)			91,215
Net change in unrealized:
Futures and forward currency contracts			(13,821,492	)			1,979,681
Foreign exchange translation			199,113				(133,895	)
Net gains (losses) from U.S. Treasury notes:
Net change in unrealized			(43,500	)			44,633
Net realized and unrealized gains (losses) allocated from the Master Fund			(7,567,855	)			10,212,554
NET INCOME (LOSS)			(9,271,482	)			8,786,359
LESS PROFIT SHARE ALLOCATION TO (FROM) THE MASTER FUND			(1,043,709	)			1,708,106
NET INCOME (LOSS) AFTER PROFIT SHARE		$	(8,227,773	)		$	7,078,253

 

(Continued)

 

 

Millburn Multi-Markets Fund L.P. 

Statements of Operations (UNAUDITED)

 

		For the six months ended
		June 30, 2017				June 30, 2016
INVESTMENT INCOME:
Interest income (allocated from the Master Fund)		$	606,496			$	211,975
EXPENSES:
Management fees			1,796,762				1,317,728
Brokerage commissions (allocated from the Master Fund)			246,288				177,412
Selling commissions and platform fees			1,675,421				1,196,062
Administrative and operating expenses			331,043				337,958
Custody fees and other expenses (allocated from the Master Fund)			16,792				11,695
Total expenses			4,066,306				3,040,855
NET INVESTMENT LOSS			(3,459,810	)			(2,828,880	)
REALIZED AND UNREALIZED GAINS (LOSSES) ALLOCATED FROM THE MASTER FUND
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			13,369,498				19,519,213
Foreign exchange translation			(16,306	)			56,455
Net change in unrealized:
Futures and forward currency contracts			(13,835,254	)			3,228,965
Foreign exchange translation			411,875				(10,651	)
Net gains (losses) from U.S. Treasury notes:
Net change in unrealized			(115,816	)			153,153
Net realized and unrealized gains (losses) allocated from the Master Fund			(186,003	)			22,947,135
NET INCOME (LOSS)			(3,645,813	)			20,118,255
LESS PROFIT SHARE ALLOCATION FROM THE MASTER FUND			60,077				3,508,948
NET INCOME (LOSS) AFTER PROFIT SHARE		$	(3,705,890	)		$	16,609,307

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Fund L.P. 

Statements of Changes in Partners’ Capital (UNAUDITED) 

For the six months ended June 30, 2017 and 2016

 

						Limited Partners
		General Partner				Series A								Series B								Series C								Total
		Amount				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS’ CAPITAL — December 31, 2016		$	2,779,224			$	158,782,193				140,590.2950			$	8,846,058				7,017.8811			$	2,478,858				1,930.6399			$	172,886,333
Capital contributions			—				19,643,577				17,021.2694				626,000				492.5395				150,000				114.5939				20,419,577
Capital withdrawals			—				(10,163,810	)			(8,827.4041	)			(829,356	)			(646.8919	)			(424,041	)			(321.7214	)			(11,417,207	)
Net income (loss) before profit share			614				(3,551,751	)			—				(83,443	)			—				(11,233	)			—				(3,645,813	)
Profit share							(53,240	)							(4,210	)							(2,627	)							(60,077	)
PARTNERS’ CAPITAL — June 30, 2017		$	2,779,838			$	164,656,969				148,784.1603			$	8,555,049				6,863.5287			$	2,190,957				1,723.5124			$	178,182,813
Net Asset Value per Unit at June 30, 2017										$	1,106.68							$	1,246.45							$	1,271.22

 

						Limited Partners
		General Partner				Series A								Series B								Series C								Total
		Amount				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS’ CAPITAL — December 31, 2015		$	3,041,602			$	108,146,251				106,145.4501			$	8,380,703				7,449.1566			$	2,626,676				2,297.6071			$	122,195,232
Capital contributions			—				9,790,000				9,025.5417				10,000				8.3419				—				—				9,800,000
Capital withdrawals			—				(5,672,497	)			(5,188.3513	)			(291,071	)			(232.3890	)			(344,490	)			(284.8980	)			(6,308,058	)
Net income before profit share			558,737				17,718,590				—				1,422,066				—				418,862				—				20,118,255
Profit share							(3,140,763	)							(284,895	)							(83,290	)							(3,508,948	)
PARTNERS’ CAPITAL — June 30, 2016		$	3,600,339			$	126,841,581				109,982.6405			$	9,236,803				7,225.1095			$	2,617,758				2,012.7091			$	142,296,481
Net Asset Value per Unit at June 30, 2016										$	1,153.29							$	1,278.43							$	1,300.62

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended June 30, 2017

 

The following information presents per unit operating performance data for each series for the three months ended June 30, 2017.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	1,157.98			$	1,296.90			$	1,321.85
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(11.08	)			(6.82	)			(6.14	)
Total trading and investing losses (1)			(46.74	)			(52.38	)			(52.52	)
Net loss before profit share allocation from Master Fund			(57.82	)			(59.20	)			(58.66	)
Less: profit share allocation from Master Fund (1) (6)			(6.52	)			(8.75	)			(8.03	)
Net loss from operations after profit share allocation from Master Fund			(51.30	)			(50.45	)			(50.63	)
NET ASSET VALUE PER UNIT — End of period		$	1,106.68			$	1,246.45			$	1,271.22
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			(5.00	)%			(4.57	)%			(4.44	)%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			(0.57	)			(0.68	)			(0.61	)
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			(4.43	)%			(3.89	)%			(3.83	)%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.61	%			2.86	%			2.61	%
Profit share allocation from Master Fund (2) (6)			(0.57	)			(0.68	)			(0.61	)
Total expenses			4.04	%			2.18	%			2.00	%
Net investment loss (3) (4) (5)			(3.87	)%			(2.12	)%			(1.87	)%

(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 gains 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.

 

(Continued)

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the six months ended June 30, 2017

 

The following information presents per unit operating performance data for each series for the six months ended June 30, 2017. 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	1,129.40			$	1,260.50			$	1,283.96
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(22.89	)			(14.44	)			(13.10	)
Total trading and investing gains (1)			0.80				0.71				1.66
Net loss before profit share allocation from Master Fund			(22.09	)			(13.73	)			(11.44	)
Less: profit share allocation from Master Fund (1) (6)			0.63				0.32				1.30
Net loss from operations after profit share allocation from Master Fund			(22.72	)			(14.05	)			(12.74	)
NET ASSET VALUE PER UNIT — End of period		$	1,106.68			$	1,246.45			$	1,271.22
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			(1.98	)%			(1.06	)%			(0.89	)%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			0.03				0.05				0.10
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			(2.01	)%			(1.11	)%			(0.99	)%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.67	%			2.92	%			2.67	%
Profit share allocation from Master Fund (2) (6)			0.03				0.05				0.10
Total expenses			4.70	%			2.97	%			2.77	%
Net investment loss (3) (4) (5)			(4.00	)%			(2.25	)%			(2.00	)%

 

(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 gains 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 (Unaudited) 

(Concluded) 

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended June 30, 2016

 

The following information presents per unit operating performance data for each series for the three months ended June 30, 2016.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	1,097.58			$	1,212.07			$	1,232.32
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(12.36	)			(8.34	)			(7.69	)
Total trading and investing gains (1)			82.35				91.20				91.44
Net income before profit share allocation from Master Fund			69.99				82.86				83.75
Less: profit share allocation from Master Fund (1) (6)			14.28				16.50				15.45
Net income from operations after profit share allocation from Master Fund			55.71				66.36				68.30
NET ASSET VALUE PER UNIT — End of period		$	1,153.29			$	1,278.43			$	1,300.62
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			6.37	%			6.82	%			6.79	%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			1.29				1.35				1.25
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			5.08	%			5.47	%			5.54	%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.82	%			3.07	%			2.82	%
Profit share allocation from Master Fund (2) (6)			1.29				1.35				1.25
Total expenses			6.11	%			4.42	%			4.07	%
Net investment loss (3) (4) (5)			(4.48	)%			(2.73	)%			(2.48	)%

 

(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 gains 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.

 

(Continued) 

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the six months ended June 30, 2016

 

The following information presents per unit operating performance data for each series for the six months ended June 30, 2016.

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	1,018.85			$	1,125.05			$	1,143.22
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(24.75	)			(16.75	)			(15.49	)
Total trading and investing gains (1)			188.40				208.40				210.67
Net income before profit share allocation from Master Fund			163.65				191.65				195.18
Less: profit share allocation from Master Fund (1) (6)			29.21				38.27				37.78
Net income from operations after profit share allocation from Master Fund			134.44				153.38				157.40
NET ASSET VALUE PER UNIT — End of period		$	1,153.29			$	1,278.43			$	1,300.62
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			15.86	%			16.79	%			16.93	%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			2.66				3.16				3.16
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			13.20	%			13.63	%			13.77	%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.84	%			3.09	%			2.83	%
Profit share allocation from Master Fund (2) (6)			2.66				3.16				3.16
Total expenses			7.50	%			6.25	%			5.99	%
Net investment loss (3) (4) (5)			(4.52	)%			(2.77	)%			(2.52	)%

(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 gains 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 (Unaudited)

 

(Concluded)

 

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 June 30, 2017 and December 31, 2016 and the results of its operations for the three and six months ended June 30, 2017 and 2016 (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 2016 annual report included in Form 10-K filed with the Securities and Exchange Commission. The December 31, 2016 information has been derived from the audited financial statements as of December 31, 2016. 

 

The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”), as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”), 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 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, 2013 to 2016, Millburn Ridgefield Corporation (the “General Partner”) has determined that no reserves for uncertain tax positions were required.

 

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 fiscal year 2016.

 

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 June 30, 2017 and December 31, 2016 was 43.16% and 74.91%, 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. 

 

Prior to January 1, 2017, the General Partner was 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. As of January 1, 2017, the Administration Fee was no longer being charged. The Partnership was allocated its pro-rata portion of the administration fee which was charged at the Master Fund level. As of December 31, 2016, $9,903 was payable by the Master Fund to the General Partner and was included in “accrued expenses” in the Master Fund’s Statements of Financial Condition. 

 

Series A Limited Partners 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 June 30, 2017 and December 31, 2016, there were no redemption charges owed to the General Partner. 

 

 

4. FINANCIAL HIGHLIGHTS

 

Per Unit operating performance for Series A, Series B and Series C Units is calculated based on Limited Partners’ Partnership 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 ended June 30,								Six months ended June 30,
		2017				2016				2017				2016
Series A			148,467.125				108,758.846				145,665.232				107,558.442
Series B			6,897.731				7,426.988				7,009.170				7,438.074
Series C			1,961.044				2,103.651				1,965.278				2,191.804

 

5. SUBSEQUENT EVENTS

 

The General Partner has performed its evaluation of subsequent events from July 1, 2017 to August 11, 2017, the date this form 10-Q was filed. Based on such evaluation, no events were discovered that required disclosure or adjustment to the financial statements.

 

 

Millburn Multi-Markets Trading L.P.
Financial statements
For the three and six months ended June 30, 2017 and 2016 (unaudited)
Statements of Financial Condition (a)		11
Condensed Schedules of Investments (a)		12
Statements of Operations (c)		16
Statements of Changes in Partners’ Capital (b)		18
Statements of Financial Highlights (c)		19
Notes to Financial Statements		21

 

(a) At June 30, 2017 and December 31, 2016 (unaudited)

 

(b) For the six months ended June 30, 2017 and 2016 (unaudited)

 

(c) For the three and six months ended June 30, 2017 and 2016 (unaudited)

 

  

Millburn Multi-Markets Trading L.P.

Statements of Financial Condition (UNAUDITED)

		June 30,				December 31,
		2017				2016
ASSETS
EQUITY IN TRADING ACCOUNTS:
Investments in U.S. Treasury notes — at fair value (amortized cost $70,031,373 and $27,441,546)		$	69,967,372			$	27,428,997
Net unrealized appreciation on open futures and forward currency contracts			—				5,155,330
Due from brokers			3,982,291				547,898
Cash denominated in foreign currencies (cost $19,807,832 and $6,590,374)			20,307,370				6,335,327
Total equity in trading accounts			94,257,033				39,467,552
INVESTMENTS IN U.S. TREASURY NOTES — at fair value (amortized cost $301,718,048 and $179,527,858)			301,400,539				179,440,654
CASH AND CASH EQUIVALENTS			50,579,912				19,892,072
ACCRUED INTEREST RECEIVABLE			872,788				414,884
DUE FROM MILLBURN MULTI-MARKETS LTD.			11,929				100
DUE FROM MILLBURN MULTI-MARKETS FUND L.P.			298				—
TOTAL		$	447,122,499			$	239,215,262
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Net unrealized depreciation on open futures and forward currency contracts		$	24,060,934			$	—
Capital withdrawal payable to Limited Partners			975,170				2,929,148
Capital withdrawal payable to General Partner			—				3,294,748
Management fee payable			514,980				320,223
Selling commissions payable			277,895				271,795
Accrued expenses			391,253				184,565
Due to brokers			7,978,487				1,390,404
Commissions and other trading fees on open futures contracts			48,064				24,334
Total liabilities			34,246,783				8,415,217
PARTNERS’ CAPITAL			412,875,716				230,800,045
TOTAL		$	447,122,499			$	239,215,262

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments (UNAUDITED)

June 30, 2017

 

		Net Unrealized
		Appreciation
		(Depreciation)				Net Unrealized
		as a % of				Appreciation
FUTURES AND FORWARD CURRENCY CONTRACTS		Partners’ Capital				(Depreciation)
FUTURES CONTRACTS
Long futures contracts:
Interest rates			(2.87	)%		$	(11,884,753	)
Livestock			(0.02	)		$	(74,420	)
Metals			0.50				2,059,513
Softs			0.00				7,820
Stock indices			(1.24	)			(5,110,065	)
Total long futures contracts			(3.63	)			(15,001,905	)
Short futures contracts:
Energies			(0.68	)			(2,794,769	)
Grains			(0.42	)			(1,730,481	)
Interest rates			0.00				11,888
Livestock			(0.03	)			(113,520	)
Metals			(0.60	)			(2,477,478	)
Softs			0.12				497,625
Stock indices			(0.03	)			(123,196	)
Total short futures contracts			(1.64	)			(6,729,931	)
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net			(5.27	)			(21,731,836	)
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			0.79				3,225,013
Total short forward currency contracts			(1.35	)			(5,554,111	)
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net			(0.56	)			(2,329,098	)
TOTAL			(5.83	)%		$	(24,060,934	)

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments (UNAUDITED)

June 30, 2017

 

U.S. TREASURY NOTES

 

Face Amount				Description		Fair Value as a % of   Partners’ Capital				Fair Value
$	92,940,000			U.S. Treasury notes, 0.875%, 08/15/2017			22.51	%		$	92,932,739
	92,940,000			U.S. Treasury notes, 0.875%, 11/15/2017			22.50				92,876,467
	92,940,000			U.S. Treasury notes, 1.000%, 02/15/2018			22.48				92,829,271
	92,940,000			U.S. Treasury notes, 1.000%, 05/15/2018			22.46				92,729,434
				Total investments in U.S. Treasury notes (amortized cost $371,749,421)			89.95	%		$	371,367,911

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2016

 

FUTURES AND FORWARD CURRENCY CONTRACTS			Net Unrealized Appreciation (Depreciation) as a % of Partners’ Capital				Net Unrealized Appreciation (Depreciation)
FUTURES CONTRACTS
Long futures contracts:
Energies			0.05	%		$	115,591
Grains			(0.00	)			(2,980	)
Interest rates
10 Year U.S. Treasury Note (4 contracts, settlement date March 2017)			0.00				3,188
Other interest rates			0.96				2,222,359
Total interest rates			0.96				2,225,547
Livestock			0.00				2,280
Metals			(0.01	)			(22,535	)
Softs			(0.04	)			(87,444	)
Stock indices			0.53				1,211,342
Total long futures contracts			1.49				3,441,801
Short futures contracts:
Energies			(0.03	)			(75,226	)
Grains			0.02				51,885
Interest rates			(0.01	)			(31,802	)
Metals			0.12				288,271
Softs			0.02				52,670
Stock indices			(0.14	)			(319,227	)
Total short futures contracts			(0.02	)			(33,429	)
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net			1.47				3,408,372
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			(0.34	)			(784,446	)
Total short forward currency contracts			1.10				2,531,404
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net			0.76				1,746,958
TOTAL			2.23	%		$	5,155,330

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2016

 

U.S. TREASURY NOTES

 

Face Amount				Description		Fair Value as a % of   Partners’ Capital				Fair Value
$	51,750,000			U.S. Treasury notes, 0.625%, 02/15/2017			22.43	%		$	51,755,054
	51,140,000			U.S. Treasury notes, 0.875%, 05/15/2017			22.18				51,192,938
	53,140,000			U.S. Treasury notes, 0.875%, 08/15/2017			23.04				53,186,705
	50,730,000			U.S. Treasury notes, 0.875%, 11/15/2017			21.98				50,734,954
				Total investments in U.S. Treasury notes
				(amortized cost $206,969,404)			89.63	%		$	206,869,651

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED)

 

		For the three months ended
		June 30,				June 30,
		2017				2016
INVESTMENT INCOME — Interest income		$	771,575			$	156,997
EXPENSES:
Brokerage fees			303,928				114,887
Management fees			1,528,976				728,853
Selling commissions and platform fees			860,970				612,093
Administrative and operating expenses			206,292				203,063
Custody fees and other expenses			18,212				8,279
Total expenses			2,918,378				1,667,175
NET INVESTMENT LOSS			(2,146,803	)			(1,510,178	)
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			13,024,008				11,109,765
Foreign exchange translation			(31,460	)			123,543
Net change in unrealized:
Futures and forward currency contracts			(31,168,615	)			2,544,503
Foreign exchange translation			437,969				(181,799	)
Net gains (losses) from U.S. Treasury notes
Net change in unrealized			(93,144	)			57,403
Total net realized and unrealized gains (losses)			(17,831,242	)			13,653,415
NET INCOME (LOSS)			(19,978,045	)			12,143,237
LESS PROFIT SHARE TO (FROM) GENERAL PARTNER			(1,472,397	)			1,799,316
NET INCOME (LOSS) AFTER PROFIT SHARE TO GENERAL PARTNER		$	(18,505,648	)		$	10,343,921

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED)

 

		For the six months ended
		June 30,				June 30,
		2017				2016
INVESTMENT INCOME — Interest income		$	1,199,438			$	290,009
EXPENSES:
Brokerage fees			484,536				242,807
Management fees			2,663,055				1,440,362
Selling commissions and platform fees			1,684,666				1,202,940
Administrative and operating expenses			464,045				400,318
Custody fees and other expenses			29,336				15,878
Total expenses			5,325,638				3,302,305
NET INVESTMENT LOSS			(4,126,200	)			(3,012,296	)
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			22,854,526				26,632,508
Foreign exchange translation			(37,614	)			75,691
Net change in unrealized:
Futures and forward currency contracts			(29,216,264	)			4,265,176
Foreign exchange translation			754,585				(12,090	)
Net gains (losses) from U.S. Treasury notes
Net change in unrealized			(281,757	)			206,693
Total net realized and unrealized gains (losses)			(5,926,524	)			31,167,978
NET INCOME (LOSS)			(10,052,724	)			28,155,682
LESS PROFIT SHARE TO GENERAL PARTNER			63,572				3,801,704
NET INCOME (LOSS) AFTER PROFIT SHARE TO GENERAL PARTNER		$	(10,116,296	)		$	24,353,978

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Changes in Partners’ Capital (UNAUDITED)

 

For the six months ended June 30, 2017:

 

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS’ CAPITAL - January 1, 2017		$	229,993,162			$	—			$	806,883			$	230,800,045
Contributions			205,759,581				63,572				—				205,823,153
Withdrawals			(13,631,186	)			—				—				(13,631,186	)
Net income (loss) before profit share			(10,050,772	)			(3,043	)			1,091				(10,052,724	)
General Partner’s allocation - profit share			(63,572	)			—				—				(63,572	)
PARTNERS’ CAPITAL- June 30, 2017		$	412,007,213			$	60,529			$	807,974			$	412,875,716

 

For the six months ended June 30, 2016:

 

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS’ CAPITAL - January 1, 2016		$	167,109,009			$	—			$	938,206			$	168,047,215
Contributions			9,900,000				116,591				—				10,016,591
Withdrawals			(10,186,135	)			—				—				(10,186,135	)
Net income before profit share			27,971,933				10,013				173,736				28,155,682
General Partner’s allocation - profit share			(3,801,704	)			—				—				(3,801,704	)
PARTNERS’ CAPITAL- June 30, 2016		$	190,993,103			$	126,604			$	1,111,942			$	192,231,649

 

See notes to financial statements (Unaudited)

 

 

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 six months ended
		June 30,				June 30,				June 30,				June 30,
		2017				2016				2017				2016
Total return before General Partner profit share allocation (3)			(4.48	)%			6.99	%			(0.86	)%			17.09	%
Less: General Partner profit share allocation (3)			(0.73	)			1.39				—				3.22
Total return after General Partner profit share allocation (3)			(3.75	)%			5.60	%			(0.86	)%			13.87	%
Ratios to average net asset value:
Expenses (1) (4)			2.40	%			2.52	%			2.46	%			2.56	%
General Partner profit share allocation (3)			(0.73	)			1.39				—				3.22
Total expenses (1)			1.67	%			3.91	%			2.46	%			5.78	%
Net investment loss (1) (2) (4)			(1.68	)%			(2.16	)%			(1.80	)%			(2.24	)%

 

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 (Unaudited)

 

 

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 six months ended
		June 30,				June 30,				June 30,				June 30,
		2017				2016				2017				2016
Total return before General Partner profit share allocation (3)			(4.59	)%			6.64	%			(1.38	)%			16.55	%
Less: General Partner profit share allocation (3)			(0.36	)			0.98				0.02				2.09
Total return after General Partner profit share allocation (3)			(4.23	)%			5.66	%			(1.40	)%			14.46	%
Ratios to average net asset value:
Expenses (1) (4)			2.84	%			3.60	%			3.10	%			3.60	%
General Partner profit share allocation (3)			(0.36	)			0.98				0.02				2.09
Total expenses (1)			2.48	%			4.58	%			3.12	%			5.69	%
Net investment loss (1) (2) (4)			(2.08	)%			(3.28	)%			(2.40	)%			(3.28	)%

 

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 proportionate share of expenses of the Partnership and the Cayman Feeder for the period ending June 30, 2017 and June 30, 2016.

(2)

Excludes General Partner profit share allocation and includes interest income.

(3)

Not Annualized.

(4)

Annualized.

 

See notes to financial statements (Unaudited)

 

 

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

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 and Millburn Multi-Markets Ltd., a Cayman Islands exempted company (the “Cayman 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 June 30, 2017 (unaudited) and December 31, 2016 and the results of its operations for the three and six months ended June 30, 2017 and 2016 (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, 2016 included in the Partnership’s annual report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2016 information has been derived from the audited financial statements as of December 31, 2016.

 

The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”), as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”), 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 Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2013 to 2016, the General Partner has determined that no reserves for uncertain tax positions were required.

 

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. At June 30, 2017 and December 31, 2016, the respective ownership percentages of the Master Fund are detailed below. The remaining interests are held by direct investors in the Master Fund. 

 

		June 30,				December 31,
		2017				2016
Partnership			43.16	%			74.91	%
Cayman Feeder			46.36	%			6.68	%
Total			89.52	%			81.59	%

 

The capital withdrawals payable at June 30, 2017 and December 31, 2016 were $975,170 and $6,223,896, respectively, as detailed below.

 

		June 30,				December 31,
		2017				2016
Direct investors (1)		$	—			$	3,294,748
Partnership			975,170				2,876,148
Cayman Feeder			—				53,000
Total		$	975,170			$	6,223,896

 

(1) Includes General Partner’s profit share of $2,994,748 at December 31, 2016.

 

 

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, prior to January 1, 2017. 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; and

 

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, 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 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.

 

Investment Company Status: The Partnership adopted Accounting Standard Update (“ASU”) 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements” and based on the General Partner’s assessment, the Partnership has been deemed to be an investment company since inception. Accordingly, the Partnership follows the investment company accounting and reporting guidance of Topic 946 and reflects its investments at fair value with unrealized gains and losses resulting from changes in fair value reflected in the Statements of Income and Expenses and Changes in Partners’ Capital.

 

During the three and six months ended June 30, 2017 and 2016, 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 June 30, 2017 and December 31, 2016 in valuing the Master Fund’s investments at fair value. At June 30, 2017 and December 31, 2016, the Master Fund had no assets or liabilities in Level 3.

 

 

Financial assets and liabilities at fair value as of June 30, 2017

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	371,367,911			$	—			$	371,367,911
Short-Term Money Market Fund*			50,329,912				—				50,329,912
Exchange-traded futures contracts
Energies			(2,794,769	)			—				(2,794,769	)
Grains			(1,730,481	)			—				(1,730,481	)
Interest rates			(11,872,865	)			—				(11,872,865	)
Livestock			(187,940	)			—				(187,940	)
Metals			(417,965	)			—				(417,965	)
Softs			505,445				—				505,445
Stock indices			(5,233,261	)			—				(5,233,261	)
Total exchange-traded futures contracts			(21,731,836	)			—				(21,731,836	)
Over-the-counter forward currency contracts			—				(2,329,098	)			(2,329,098	)
Total futures and forward currency contracts (2)			(21,731,836	)			(2,329,098	)			(24,060,934	)
Total financial assets and liabilities at fair value		$	399,965,987			$	(2,329,098	)		$	397,636,889
Per line item in Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral										$	69,967,372
Investments in U.S. Treasury notes held in custody											301,400,539
Total investments in U.S. Treasury notes										$	371,367,911
(2)
Net unrealized appreciation on open futures and forward currency contracts										$	—
Net unrealized depreciation on open futures and forward currency contracts											(24,060,934	)
Total net unrealized appreciation on open futures and forward currency contracts										$	(24,060,934	)

 

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

 

 

Financial assets and liabilities at fair value as of December 31, 2016

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	206,869,651			$	—			$	206,869,651
Exchange-traded futures contracts
Energies			40,365				—				40,365
Grains			48,905				—				48,905
Interest rates			2,193,745				—				2,193,745
Livestock			2,280				—				2,280
Metals			265,736				—				265,736
Softs			(34,774	)			—				(34,774	)
Stock indices			892,115				—				892,115
Total exchange-traded futures contracts			3,408,372				—				3,408,372
Over-the-counter forward currency contracts			—				1,746,958				1,746,958
Total futures and forward currency contracts (2)			3,408,372				1,746,958				5,155,330
Total financial assets and liabilities at fair value		$	210,278,023			$	1,746,958			$	212,024,981
Per line item in Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral										$	27,428,997
Investments in U.S. Treasury notes held in custody											179,440,654
Total investments in U.S. Treasury notes										$	206,869,651
(2)
Net unrealized appreciation on open futures and forward currency contracts										$	5,155,330
Net unrealized depreciation on open futures and forward currency contracts											—
Total unrealized appreciation on open futures and forward currency contracts										$	5,155,330

 

4. DERIVATIVE INSTRUMENTS

 

The Derivatives and Hedging topic of the Codification requires qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.

 

The 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 June 30, 2017 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 oil producing countries 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 June 30, 2017 and December 31, 2016. 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 June 30, 2017

 

		Fair Value - Long Positions								Fair Value - Short Positions								Net Unrealized Gain (Loss) on Open
Sector		Gains				Losses				Gains				Losses				Positions
Futures contracts:
Energies		$	—			$	—			$	430,803			$	(3,225,572	)		$	(2,794,769	)
Grains			—				—				38,225				(1,768,706	)			(1,730,481	)
Interest rates			599,131				(12,483,884	)			11,965				(77	)			(11,872,865	)
Livestock			2,020				(76,440	)			—				(113,520	)			(187,940	)
Metals			2,128,681				(69,168	)			164,656				(2,642,134	)			(417,965	)
Softs			9,340				(1,520	)			572,920				(75,295	)			505,445
Stock indices			128,931				(5,238,996	)			37,302				(160,498	)			(5,233,261	)
Total futures contracts			2,868,103				(17,870,008	)			1,255,871				(7,985,802	)			(21,731,836	)
Forward currency contracts			5,145,604				(1,920,591	)			1,554,297				(7,108,408	)			(2,329,098	)
Total futures and forward currency contracts		$	8,013,707			$	(19,790,599	)		$	2,810,168			$	(15,094,210	)		$	(24,060,934	)

 

 

Fair value of futures and forward currency contracts at December 31, 2016

 

																		Net
																		Unrealized
																		Gain (Loss)
			Fair Value - Long Positions								Fair Value - Short Positions								on Open
Sector			Gains				Losses				Gains				Losses				Positions
Futures contracts:
Energies		$	125,805			$	(10,214	)		$	23,840			$	(99,066	)		$	40,365
Grains			—				(2,980	)			122,923				(71,038	)			48,905
Interest rates			2,658,089				(432,542	)			104				(31,906	)			2,193,745
Livestock			5,130				(2,850	)			—				—				2,280
Metals			750,102				(772,637	)			545,558				(257,287	)			265,736
Softs			547				(87,991	)			156,789				(104,119	)			(34,774	)
Stock indices			1,876,503				(665,161	)			22,049				(341,276	)			892,115
Total futures contracts			5,416,176				(1,974,375	)			871,263				(904,692	)			3,408,372
Forward currency contracts			476,460				(1,260,906	)			3,059,242				(527,838	)			1,746,958
Total futures and forward currency contracts		$	5,892,636			$	(3,235,281	)		$	3,930,505			$	(1,432,530	)		$	5,155,330

 

The effect of trading futures and forward currency contracts is represented on the Master Fund’s Statements of Operations for the three and six months ended June 30, 2017 and 2016 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 six months ended June 30, 2017 and 2016

		Three months				Three months				Six months				Six months
		ended:				ended:				ended:				ended:
		June 30,				June 30,				June 30,				June 30,
Sector		2017				2016				2017				2016
Futures contracts:
Energies		$	(6,031,328	)		$	(1,196,418	)		$	(8,743,032	)		$	(184,697	)
Grains			(5,356,393	)			2,907,251				(5,271,260	)			3,264,168
Interest rates			(7,310,285	)			11,001,743				(7,627,844	)			23,346,857
Livestock			(303,720	)			11,960				(532,720	)			8,260
Metals			72,075				(967,645	)			271,817				(1,568,620	)
Softs			1,999,871				57,539				2,419,269				(843,813	)
Stock indices			10,246,725				1,073,387				24,694,282				4,265,090
Total futures contracts			(6,683,055	)			12,887,817				5,210,512				28,287,245
Forward currency contracts			(11,461,552	)			766,451				(11,572,250	)			2,610,439
Total futures and forward currency contracts		$	(18,144,607	)		$	13,654,268			$	(6,361,738	)		$	30,897,684

 

 

For the three months ended June 30, 2017 and 2016, the monthly average number of future contracts bought and sold and the monthly average notional value of forward currency contracts traded are detailed below:

 

			2017				2016
Average bought				31,218				11,887
Average sold				29,062				10,964
Average notional			$	3,434,000,000			$	1,405,000,000

 

The customer agreements between the Master Fund, the futures clearing brokers including, Deutsche Bank Securities Inc. (a wholly owned subsidiary of Deutsche Bank AG) and SG Americas Securities, LLC, as well as the FX prime broker, Deutsche Bank AG, and the swap dealer, Morgan Stanley & Co., LLC, give the Master Fund the legal right to net unrealized gains and losses on open futures and foreign currency contracts. The Master Fund netted, for financial reporting purposes, the unrealized gains and losses on open futures and forward currency contracts on the Statements of Financial Condition as the criteria under ASC 210-20, “Balance Sheet,” were met.

 

The following table represents gross amounts of assets or liabilities which qualify for offset as presented per the Statement of Financial Condition as of June 30, 2017 and December 31, 2016.

 

Offsetting of derivative assets and liabilities at June 30, 2017

						Gross amounts				Net amounts of
						offset in the				liabilities presented in
		Gross amounts of				Statement of				the Statement of
Liabilities		recognized liabilities				Financial Condition				Financial Condition
Futures contracts
Counterparty C		$	10,455,337			$	(878,883	)		$	9,576,454
Counterparty I			15,400,473				(3,245,091	)			12,155,382
Total futures contracts			25,855,810				(4,123,974	)			21,731,836
Forward currency contracts
Counterparty G		$	5,195,915			$	(3,375,063	)		$	1,820,852
Counterparty H			3,833,084				(3,324,838	)			508,246
Total forward contracts			9,028,999				(6,699,901	)			2,329,098
Total liabilities		$	34,884,809			$	(10,823,875	)		$	24,060,934

 

Amounts Not Offset in the Statement
of Financial Condition

		Net amounts of
		Liabilities
		presented in the
Counterparty		Statement of Financial					Financial				Collateral
		Condition					Instruments				Pledged(1)(2)				Net Amount(3)
Counterparty C		$	9,576,454			$	—			$	(9,576,454	)		$	—
Counterparty I			12,155,382				—				(12,155,382	)
Counterparty G			1,820,852				—				—				1,820,852
Counterparty H			508,246				—				—				508,246
Total		$	24,060,934			$	—			$	(21,731,836	)		$	2,329,098

 

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

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

⁽³⁾ Net amount represents the amounts owed by the Partnership to each counterparty as of June 30, 2017.

 

 

Offsetting of derivative assets and liabilities at December 31, 2016

 

						Gross amounts				Net amounts of
						offset in the				assets presented in
		Gross amounts of				Statement of				the Statement of
Assets		recognized assets				Financial Condition				Financial Condition
Futures contracts
Counterparty C		$	3,612,002			$	(1,405,548	)		$	2,206,454
Counterparty I			2,675,437				(1,473,519	)			1,201,918
Total futures contracts			6,287,439				(2,879,067	)			3,408,372
Forward currency contracts
Counterparty G		$	1,707,952			$	(615,087	)		$	1,092,865
Counterparty H			1,827,750				(1,173,657	)			654,093
Total forward currency contracts			3,535,702				(1,788,744	)			1,746,958
Total assets		$	9,823,141			$	(4,667,811	)		$	5,155,330

 

						Amounts Not Offset in the Statement of Financial Condition
		Net amounts of
		Assets
		presented in the
Counterparty		Statement of Financial				Financial				Collateral
		Condition				Instruments				Received(1)(2)				Net Amount(3)
Counterparty C		$	2,206,454			$	—			$	(2,206,454	)		$	—
Counterparty I			1,201,918				—				(1,201,918	)			—
Counterparty G			1,092,865				—				—				1,092,865
Counterparty H			654,093				—				—				654,093
Total		$	5,155,330			$	—			$	(3,408,372	)		$	1,746,958

 

(1)	Collateral received includes trades made on exchanges. These trades are subject to central counterparty clearing where settlement is guaranteed by the exchange.

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

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

 

 

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 through Deutsche Bank AG (“DB”) and Morgan Stanley & Co. LLC (“MS”). The Master Fund’s concentration of credit risk associated with DB or MS nonperformance includes unrealized gains inherent in such contracts, which are recognized in the Statements of Financial Condition plus the value of margin or collateral held by DB, and MS. The amount of such credit risk was $25,181,222 and $12,232,055 at June 30, 2017 and December 31, 2016, respectively.

 

 

5. PROFIT SHARE

 

The following table indicates the total profit share earned and accrued during the three and six months ended June 30, 2017 and 2016. 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.

 

			Three months ended:				Three months ended:
			June 30, 2017				June 30, 2016
Profit share earned			$	57,924			$	96,031
Reversal of profit share (1)				(1,530,321	)			(1,981,827	)
Profit share accrued				—				3,685,112
Total profit share			$	(1,472,397	)		$	1,799,316

 

			Six months ended:				Six months ended:
			June 30, 2017				June 30, 2016
Profit share earned			$	63,572			$	116,592
Profit share accrued				—				3,685,112
Total profit share			$	63,572			$	3,801,704

 

⁽¹⁾ On April 1^st

 

6. FINANCIAL HIGHLIGHTS

 

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 and 2) Limited Partners’ capital taken as a whole. 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 partners’ 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.

 

7. SUBSEQUENT EVENTS

 

During the period from July 1, 2017 to August 11, 2017, contributions of $63,211,000 were made to the Master Fund. The General Partner has performed its evaluation of subsequent events through August 11, 2017, the date the form 10-Q was filed. Based on such evaluation, no further events were discovered that required disclosure or adjustment to the 10-Q.

 

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, forwards, and spot contracts on interest rate instruments, agricultural commodities, currencies, metals, energy and stock indices, and forward contracts on currencies, and may trade options on the foregoing and swaps thereon. 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 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 substantially higher; and (4) prohibiting pyramiding (that is, using unrealized profits in a particular market as margin for additional positions in the same market). 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 importantly, 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 bank held 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, forwards, 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 June 30, 2017, 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 current market prices (“Spot Price”). Forward currency contracts are valued based on pricing models that consider the Spot Price plus the financing cost or benefit (“Forward Point”). Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the 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.

 

 

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.

 

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 June 30, 2017 

 

 

			Total
			Partners’
			Capital of the
Month Ending:			Partnership
June 30, 2017			$	178,182,813
March 31, 2017				179,595,657
December 31, 2016				172,886,333

 

		Three Months				Six Months
Change in Partners’ Capital		$	(1,412,844	)		$	5,296,480
Percent Change			(0.79	)%			3.06	%

 

THREE MONTHS ENDED JUNE 30, 2017

 

The decrease in the Partnership’s net assets of $1,412,844 was attributable to net loss after profit share of $8,227,773, and withdrawals of $6,033,248 which were partially offset by contributions of $12,848,177.

 

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, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended June 30, 2017 increased $245,935 relative to the corresponding period in 2016. The increase was due to an increase in the average net asset value of the Partnership during the three months ended June 30, 2017, relative to the corresponding period in 2016. 

 

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 June 30, 2017 increased $53,226 relative to the corresponding period in 2016. The increase was due to an increase in average net assets of the Partnership during the three months ended June 30, 2017, relative to the corresponding period in 2016.

 

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, contributions and withdrawals. Selling commissions and platform fees for the three months ended June 30, 2017 increased $246,740 relative to the corresponding period in 2016. The increase was due to an increase in the average net asset value of commission paying investors of the Partnership during the three months ended June 30, 2017, relative to the corresponding period in 2016. 

 

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 June 30, 2017 decreased $40,893 relative to the corresponding period in 2016. The decrease was due mainly to the Partnership no longer paying TMC for legal and accounting services during the three months ended June 30, 2017, relative to the corresponding period in 2016. 

 

 

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 June 30, 2017 increased $229,888 relative to the corresponding period in 2016. This increase was due predominantly to an increase in short-term U.S. Treasury yields during the three months ended June 30, 2017 relative to the corresponding period in 2016, and partially due to an increase in average net assets over the same period.

 

For the three months ended June 30, 2017, the Partnership, through its investment in the Master Fund, experienced net realized and unrealized losses of $7,567,855 from its trading operations (including foreign exchange transactions and translations). Management fees of $916,282, brokerage commissions of $137,663, selling commissions and platform fees of $855,366, administrative and operating expenses of $131,013, and custody fees and other expenses of $8,487 were incurred. Interest income of $345,184 and the reversal of accrued profit share to the General Partner of $1,043,709 partially offset the Master Fund expenses allocated to the Partnership resulting in net loss after profit share of $8,227,773.

 

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

 

		% Gain
Sector		(Loss)
Currencies			(2.79	)%
Energies			(1.50	)%
Grains			(1.27	)%
Interest rates			(1.59	)%
Livestock			(0.07	)%
Metals			0.02	%
Softs			0.48	%
Stock indices			2.60	%
Trading loss			(4.12	)%

 

SIX MONTHS ENDED JUNE 30, 2017

 

The increase in the Partnership’s net assets of $5,296,480 was attributable to contributions of $20,419,577 which were offset by net loss after profit share through its investment in the Master Fund of $3,705,890 and withdrawals of $11,417,207. 

 

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, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the six months ended June 30, 2017 increased $479,034 relative to the corresponding period in 2016. The increase was due to an increase in the average net asset value of the Partnership during the six months ended June 30, 2017, relative to the corresponding period in 2016. 

 

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 six months ended June 30, 2017 increased $68,876 relative to the corresponding period in 2016. The increase was due an increase in average net assets of the Partnership during the six months ended June 30, 2017, relative to the corresponding period in 2016.

 

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, contributions and withdrawals. Selling commissions and platform fees for the six months ended June 30, 2017 increased $479,359 relative to the corresponding period in 2016. The increase was due to an increase in the average net asset value of commission paying investors of the Partnership during the six months ended June 30, 2017, relative to the corresponding period in 2016. 

 

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 six months ended June 30, 2017 decreased $6,915 relative to the corresponding period in 2016. The decrease was due mainly to the Partnership no longer paying TMC for legal and accounting services during the six months ended June 30, 2017, relative to the corresponding period in 2016.

 

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 six months ended June 30, 2017 increased $394,521 relative to the corresponding period in 2016. This increase was due predominantly to an increase in short-term U.S. Treasury yields during the six months ended June 30, 2017 relative to the corresponding period in 2016, and partially due to an increase in average net assets over the same period.

 

For the six months ended June 30, 2017, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized losses of $186,003 from trading operations (including foreign exchange transactions and translations). Management fees of $1,796,762, brokerage commissions of $246,288, selling commissions and platform fees of $1,675,421, administrative and operating expenses of $331,043, custody fees and other expenses of $16,792, and profit share of $60,077 were paid or accrued. Interest income of $606,496 partially offset the Master Fund expenses allocated to the Partnership resulting in net loss after profit share of $3,705,890.

 

 

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

 

		% Gain
Sector		(Loss)
Currencies			(2.71	)%
Energies			(2.15	)%
Grains			(1.54	)%
Interest rates			(1.55	)%
Livestock			(0.19	)%
Metals			0.11	%
Softs			0.47	%
Stock indices			7.47	%
Trading loss			(0.09	)%

 

MANAGEMENT DISCUSSION – 2017

 

Three months ended June 30, 2017

 

The Partnership sustained a decline in returns during the second quarter of 2017 due largely to losses from trading financial and energy futures in the wake of hawkish monetary policy comments from the heads of several central banks at the European Central Bank (“ECB”) conference in Sintra, Portugal late in June (the “Sintra Conference”). For the quarter, losses from trading interest rate, energy and grain futures and currency forwards outweighed gains from trading equity and soft commodity futures. Trading of metal and livestock futures were each nearly flat.

 

Mario Draghi from the ECB, Mark Carney from the Bank of England and Stephen Poloz from the Bank of Canada each indicated at the Sintra Conference that with global growth broadening and strengthening, the time is approaching for 10 years of extraordinarily easy monetary policy to come to an end.  Janet Yellen from the Federal Reserve had provided a similar comment after the recent Federal Open Market Committee meeting. In response, global interest rates, which had been falling or stable for most of the quarter, spiked higher and long interest rate futures positions, which had been profitable through June 26th, turned unprofitable. Long positions in German and British interest rate futures were unprofitable. Long positions in French and Italian bond futures, which had benefitted from the French election results and from the Italian bank rescues, were profitable, although the gains were reduced significantly after the Sintra Conference. Long positions in U.S. note and bond futures were also profitable albeit with reductions at the end of June.

 

Foreign exchange trading remained volatile as the U.S. dollar, buffeted by conflicting influences, declined markedly in a saw-toothed pattern during the quarter. On the one hand, persistent increases in the official interest rate by the Federal Reserve were supportive of the dollar. On the other hand, the fact that growth in Europe and Asia was accelerating while growth in the U.S. remained tepid, and that politics in the U.S. was becoming increasingly more volatile while the political outlook in Europe had improved significantly, weighed on the U.S. dollar. Finally, the fact that comments from the Sintra Conference suggested a relative tightening of non-U.S. monetary policy also worked against the U.S. dollar. Consequently, long dollar positions against the currencies of Australia, the U.K., Canada, New Zealand, Europe, Switzerland, Sweden, Norway, Poland, Japan and Singapore were unprofitable. Short dollar carry trades in the Brazilian real and Russian ruble were also unprofitable as political uncertainties in each country prompted declines that outweighed the interest rate advantages. A long Mexican peso trade was profitable as the market came to believe that the impact of the Trump Presidency on Mexico would be less than initially feared.

 

Energy prices displayed sharp swings within a broad range during the quarter. On balance, trading of crude oil, RBOB gasoline, London gas oil, heating oil and natural gas were each unprofitable, with significant losses occurring on short energy positions late in the period as the dollar fell and energy prices rose after the Sintra Conference comments.

 

Long positions in most European and Asian equity futures were profitable against the backdrop of the IMF, the Brookings Institution, the Financial Times and central banks around the globe agreeing that the economic recovery is broadening throughout Europe and Asia; recent elections in France, the Netherlands and the U.K., producing moderate rather than extreme outcomes; a generally weakening U.S. dollar; and signs that China is addressing its debt problems. A short VIX position was also fractionally profitable. U.S. equity futures were slightly profitable as gains from long S&P and Dow Jones futures positions were partially offset by losses from trading the Nasdaq futures. Long positions in Dutch and Canadian futures were unprofitable. The sector gains were reduced markedly when interest rates rose sharply late in June.

 

Short wheat, corn and soybean trades were unprofitable late in quarter as a drought in the U.S. high plains region and reduced wheat plantings in Canada underpinned prices. In addition, long soybean and soybean meal positions were unprofitable in April and May.

 

A short sugar position was profitable and, to a lesser extent, so too were short coffee and cocoa trades.

 

The profits from a short silver trade were countered by losses from trading gold, platinum and most industrial metals.

 

 

Three months ended March 31, 2017 

 

The Partnership registered a solid first quarter gain due to profits from long equity futures positions. Trading of currency forwards was slightly profitable, trading of commodity futures was fractionally negative and trading of interest rate futures was essentially flat.

 

According to the Brookings Institution and the Financial Times, the global economic recovery is now “broad-based and stable”. Morgan Stanley concurs, stating that a “…synchronous global recovery…is exhibiting more self-sustaining characteristics”. Against this background, long positions in U.S., European and Asian equity futures were broadly profitable. A long VIX trade was also profitable. Short positions in Indian and South African stock futures were marginally negative. Neither the fading of the positive impulses from the Trump election victory nor an increase in political and geopolitical tensions was able to blunt this equity advance.

 

The U.S. dollar, which had risen sharply during 2016’s fourth quarter, was volatile and weakened during the first three months of 2017 as the difficult reality of governing diminished the election euphoria for the Trump administration. Profits from short U.S. dollar trades versus the currencies of Australia, Brazil, India, Mexico, Russia, and Turkey were offset by the losses from long U.S. dollar positions versus the euro and the currencies of Great Britain, Canada, Japan, Korea, New Zealand, Norway, Sweden and Singapore. Meanwhile, a long euro/short Polish zloty trade and a short euro/long Turkish lira position were each slightly profitable.

 

Interest rates rose early in the period in response to the improving economic outlook and to evidence that central banks worldwide were pulling back from the long era of ultralow interest rates and quantitative easing. Indeed the U.S. Federal Reserve (the “Fed”) did raise its official rate again by 0.25% during the quarter. Moreover, Mario Draghi, the President of ECB, indicated that “there is no longer the sense of urgency in taking further actions.” The People’s Bank of China (the “PBOC”) edged toward a tighter policy during the quarter, as well. Finally, the Bank of England and the Bank of Japan issued improved outlooks for their economies. Later on, however, political tensions in the U.S., Great Britain, the Netherlands, France, Turkey and South Africa and geopolitical tensions and terrorism involving North Korea, South Korea, the U.K., Canada and Syria produced a flight to safety and declining rates. On balance, the sector was flat for the quarter and at month-end the Partnership’s interest rate futures positions remained generally long.

 

Energy prices were volatile and range-bound in the quarter. Production cut efforts by the Organization of the Petroleum Exporting Countries buoyed prices at times, while increasing U.S. shale production weighed on prices at other times. A long RBOB gasoline position was unprofitable as was trading of crude oil and other products.

 

Trading of metal futures was marginally profitable as small profits from long aluminum, zinc and palladium positions were larger than small losses from short gold and silver positions.

 

Trading of soft and agricultural commodities was marginally unprofitable. Grain trading was unprofitable due to losses from a short corn trade early in the period and from long soybean and soybean meal positions. A short wheat position was profitable in March. A short sugar position was also profitable in March. Trading of livestock was slightly negative.

 

 

Periods ended June 30, 2016 

 

Month Ending:						Total Partners’ Capital of the Partnership
June 30, 2016						$	142,296,481
March 31, 2016							131,426,405
December 31, 2015							122,195,232
		Three Months				Six Months
Change in Partners’ Capital		$	10,870,076			$	20,101,249
Percent Change			8.27	%			16.45	%

 

 

THREE MONTHS ENDED JUNE 30, 2016

 

The increase in the Partnership’s net assets of $10,870,076 was attributable to net income after profit share of $7,078,253, and contributions of $7,567,000 which were partially offset by withdrawals of $3,775,177.

 

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, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended June 30, 2016 increased $69,798 relative to the corresponding period in 2015. The increase was due to an increase in the average net asset value of the Partnership during the three months ended June 30, 2016, relative to the corresponding period in 2015.

 

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 June 30, 2016 increased $14,541 relative to the corresponding period in 2015. The increase was due to an increase in average net assets of the Partnership during the three months ended June 30, 2016, relative to the corresponding period in 2015.

 

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, contributions and withdrawals. Selling commissions and platform fees for the three months ended June 30, 2016 increased $60,384 relative to the corresponding period in 2015. The increase was due to an increase in the average net asset value of commission paying investors of the Partnership during the three months ended June 30, 2016, relative to the corresponding period in 2015. 

 

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 June 30, 2016 increased $17,788 relative to the corresponding period in 2015. The increase was due mainly to an increase in the Partnership’s average net asset value during the three months ended June 30, 2016, relative to the corresponding period in 2015. 

 

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 June 30, 2016 increased $60,942 relative to the corresponding period in 2015. This increase was due predominantly to an increase in short-term U.S. Treasury yields during the three months ended June 30, 2016 relative to the corresponding period in 2015, and partially due to an increase in average net assets over the same period.

 

For the three months ended June 30, 2016, the Partnership, through its investment in the Master Fund, experienced net realized and unrealized gains of $10,212,554 from trading operations (including foreign exchange transactions and translations). Management fees of $670,347, brokerage commissions of $84,437, selling commissions and platform fees of $608,626, administrative and operating expenses of $171,906, custody fees and other expenses of $6,175, and profit share of $1,708,106 were paid or accrued. Interest income of $115,296 partially offset the Master Fund expenses allocated to the Partnership resulting in net income after profit share of $7,078,253.

 

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

Sector		% Gain (Loss)
Currencies			0.40	%
Energies			(0.67	)%
Grains			1.61	%
Interest rates			6.06	%
Livestock			0.00	%
Metals			(0.54	)%
Softs			0.03	%
Stock indices			0.59	%
Trading gain			7.48	%

 

SIX MONTHS ENDED JUNE 30, 2016

 

The increase in the Partnership’s net assets of $20,101,249 was attributable to net income after profit share through its investment in the Master Fund of $16,609,307 and contributions of $9,800,000 which were partially offset by withdrawals of $6,308,058. 

 

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, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the six months ended June 30, 2016 increased $109,472 relative to the corresponding period in 2015. The increase was due to an increase in the average net asset value of the Partnership during the six months ended June 30, 2016, relative to the corresponding period in 2015. 

 

 

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 six months ended June 30, 2016 increased $25,439 relative to the corresponding period in 2015. The increase was due an increase in average net assets of the Partnership during the six months ended June 30, 2016, relative to the corresponding period in 2015.

 

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, contributions and withdrawals. Selling commissions and platform fees for the six months ended June 30, 2016 increased $91,836 relative to the corresponding period in 2015. The increase was due to an increase in the average net asset value of commission paying investors of the Partnership during the six months ended June 30, 2016, relative to the corresponding period in 2015. 

 

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 six months ended June 30, 2016 increased $27,865 relative to the corresponding period in 2015. The increase was due mainly to an increase in the Partnership’s average net asset value during the six months ended June 30, 2016, relative to the corresponding period in 2015.

 

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 six months ended June 30, 2016 increased $123,420 relative to the corresponding period in 2015. This increase was due predominantly to an increase in short-term U.S. Treasury yields during the six months ended June 30, 2016 relative to the corresponding period in 2015, and partially due to an increase in average net assets over the same period.

 

For the six months ended June 30, 2016, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized gains of $22,947,135 from trading operations (including foreign exchange transactions and translations). Management fees of $1,317,728, brokerage commissions of $177,412, selling commissions and platform fees of $1,196,062, administrative and operating expenses of $337,958, custody fees and other expenses of $11,695, and profit share of $3,508,948 were paid or accrued. Interest income of $211,975 partially offset the Master Fund expenses allocated to the Partnership resulting in net income after profit share of $16,609,307.

 

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

Sector		% Gain (Loss)
Currencies			1.49	%
Energies			0.05	%
Grains			1.87	%
Interest rates			13.92	%
Livestock			0.06	%
Metals			(0.81	)%
Softs			(0.42	)%
Stock indices			2.39	%
Trading gain			18.55	%

 

MANAGEMENT DISCUSSION – 2016

 

Three months ended June 30, 2016

 

The Partnership was profitable during the second quarter with gains from long interest rate futures positions again leading the way. Trading of equity futures and foreign exchange forwards added fractionally to the gain. Meanwhile, trading of commodity futures was also slightly profitable as the gain from trading grain futures outdistanced the losses from the energy and metals sectors.

 

Long positions in U.S., German, French, British, Canadian and Australian interest rate futures were profitable, particularly after the U.K. voters’ surprise vote to have the U.K. leave the European Union (the “EU”) produced a flight to safety and an expectation that easier monetary policy would be forthcoming rather broadly going forward. The weak June employment report in the U.S. that prompted another delay in the Fed rate rise program had underpinned the prices of note, bond and short term interest rate futures earlier. The fact that growth and inflation have failed to accelerate convincingly, and that the World Bank, International Monetary Fund and Organization for Economic Co-operation and Development among others have lowered their global growth projections also supported fixed income prices.

 

 

Currency trading was particularly volatile as the dollar was buffeted to and fro during the quarter. The U.S. currency would strengthen whenever Fed Governors hinted that a rate increase was possible, such as in late April-early May and in late May-early June, but fall when those expectations faded. For example, after an extraordinarily weak U.S. June jobs report, such hopes were put on hold and the dollar weakened. Then, when Fed Chair Janet Yellen cited real concerns that the “temporary headwinds” that had blunted the Fed’s rate rise program might actually reflect Lawrence Summers’ “secular stagnation” rather than just passing concerns, the U.S. dollar softened further. However, following the surprise decision of the British electorate to leave the EU, a flight to safety and quality prompted an upward U-turn for the dollar. Overall, long U.S. dollar trades against the pound sterling and Swiss franc, and short dollar trades relative to the Brazilian real, New Zealand dollar and South African rand were profitable. On the other hand, short U.S. dollar trades versus the Australian, Israeli, Mexican, Polish and Swedish currencies produced losses. Trading the euro against the dollar, Polish zloty and Turkish lira was also unprofitable.

 

Trading of equity futures was fractionally profitable after a volatile quarter. Following a strong rebound from the February lows, equity trading was unsettled periodically by currency turmoil, the uncertainty surrounding Bank of Japan, the Fed, the European Central Bank and the Bank of England, worries about future growth and inflation outlooks, and actualized weakness in corporate profits. Still, gains on long positions in non-tech U.S., Canadian and British stock futures and from a short VIX trade outpaced the losses from trading of a number of European and Asian indices.

 

Long positions in soybeans and soybean meal were profitable as bad weather in Brazil and Argentina underpinned prices for most of the period. A long sugar position posted a gain when prices rose as production in Thailand, India and Brazil was hurt by El Niño weather influences.

 

A short natural gas trade registered a loss as warmer than normal weather boosted prices, especially in June. Trading of London gas oil, heating oil, RBOB gasoline and WTI crude were also unprofitable, while a long position in Brent crude produced a partially offsetting gain.

 

Short positions in gold, silver, platinum, palladium, copper, aluminum, lead and nickel were each slightly unprofitable. On the other hand, a long zinc trade was profitable near the end of the quarter.

 

Three months ended March 31, 2016 

 

During a quarter of extreme market volatility, the Partnership registered a strong performance led by gains on long interest rate futures positions. Trading of equity futures and foreign exchange forwards were also profitable. Meanwhile, commodity futures were marginally negative as a gain from trading energy futures was outweighed by fractional losses from trading metal and agricultural futures.

 

Concerns about global growth that International Monetary Fund Managing Director Christine Lagarde described as ’…too low, too fragile and facing increased risks to its durability…”, combined with doubts about policy makers’ competence and capabilities, generated strong demand for government securities for most of the quarter. The demand for this debt was underpinned when: the Bank of Japan moved official interest rates into negative territory at the end of January; the Bank of England delayed any potential rate increase; the ECB and PBOC eased monetary policy in March; and a speech by Fed Chair Janet Yellen squashed expectations for a near term Fed rate increase. Consequently, long positions in U.S., German, French, Italian, British, Japanese, Australian and Canadian notes and bonds were profitable. Long positions in short-term dollar and sterling interest rate futures were also profitable.

 

Equity markets were particularly volatile during the first quarter of 2016, tracing out a classic V-shaped path. The tumultuous first half of the period saw many equity indices experiencing multiyear lows before rebounding impressively over the second half of the quarter. Early on, weak economic data out of China and concerns about official policy decisions generated a renewed rout in Chinese equities and the yuan. These events, combined with a further collapse in energy prices; worries that Fed interest rate increases and a stronger dollar might impede global growth; and a halt in corporate profit growth, produced a broad, sharp equity selloff. Later, equity prices recovered as energy prices rebounded, the ECB, PBOC and Fed displayed easier policy tendencies, the U.S. dollar eased and growth concerns moderated. On balance, short positions in Chinese, Hong Kong, Japanese, Singaporean, Indian, and Spanish futures were profitable. Trading of U.S. and Canadian stock index futures also posted gains. On the other hand, short positions in Dutch and South African futures, a long U.K stock futures position, and trading of the European stoxx future resulted in somewhat offsetting losses.

 

Foreign exchange trading was also volatile. At the beginning of the year, given the search for safety, declining oil prices and the Fed “relatively hawkish” policy position, the U.S. dollar strengthened. Thus, during January and February, long dollar trades versus the pound sterling, Canadian dollar, Korean won, Russian Ruble and Mexican peso were profitable. The pound fell precipitously when the possibility of Britain’s exit from the EU became more likely and Boris Johnson, the mayor of London, endorsed the move. As the quarter unfolded, however, the PBOC aggressively implemented measures to support the yuan; the G-20 Shanghai Communique in late February signaled a strong stance against currency competition that took some steam out of the dollar; and the likelihood of a near term increase in interest rates by the Fed diminished, prompting a U.S. dollar decline, especially against emerging market currencies where interest rates tend to be higher. A stabilization of commodity prices also helped the commodity producing countries. A series of events abroad further encouraged the U.S. dollar slippage: Mexico’s surprise February 50 basis point hike in official interest rates; the increasing likelihood of an ouster of President Dilma Rousseff in Brazil; an increase in official rates in South Africa; and rising oil prices and high interest rates supporting the Russian ruble. Consequently, short dollar positions against the currencies of Australia, Brazil, Canada, Columbia, India, Israel, Mexico, New Zealand, Russia, South Africa, and Turkey were profitable. On the other hand, long dollar trades versus the euro, yen, Swiss franc, Swedish krona, Norwegian kroner, Czech koruna, Polish zloty and Chilean peso were unprofitable.

 

 

With the International Energy Agency suggesting that the “…world could drown in [oil] oversupply…”; with crude oil production at or near recent record levels in many countries—e.g., Saudi Arabia, Russia, the U.S., and Iraq; with Iranian exports ramping up; and with global demand still sluggish, crude prices slumped below $30 per barrel in January. Short positions in Brent crude, WTI crude, RBOB gasoline, London gas oil, heating oil and natural gas were profitable. Subsequently, reports that Saudi Arabia, Russia and a number of other producers were discussing plans for a production freeze and would meet in Doha in April sparked an oil price rebound. Indeed, oil prices reached a three month high above $40 per barrel on March 18. Consequently, losses were suffered on these same short crude oil, crude products and natural gas trades, and positions were reduced and/or reversed. Overall, energy trading was fractionally profitable for the quarter due to gains from WTI crude, natural gas, London gas oil and spread trading of crude.

 

Industrial metal prices vacillated during the quarter but did move up somewhat in synchrony with energy prices, and short positions in industrial metals were unprofitable. Safe haven demand pushed up gold prices, especially in February, and a small long trade was fractionally profitable, providing a partial offset.

  

Trading of sugar was unprofitable, as was a long cocoa trade in January, and a short Arabica coffee position in March. The profits from short corn and wheat trades fractionally outdistanced the losses from trading soybeans and soybean meal.

 

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). 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 June 30, 2017 and December 31, 2016.

 

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 its evaluation, has 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 June 30, 2017 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 Agreement of Limited Partnership, the Partnership may sell Unit at the beginning of each calendar month.  On May 1, 2017 and June 1, 2017 the Partnership sold Units to new and existing limited partners of $2,597,500 and $3,866,000 respectively. There were no underwriting discounts or commissions in connection with the sales of the Units described above.

 

Each of the foregoing Interests 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(b) under the 1933 Act.

 

(c) Pursuant to the Partnership’s Third Amended and Restated Limited Partnership Agreement, investors 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 June 30, 2017.

			Series A								Series B								Series C
Date of			Units				NAV				Units				NAV				Units				NAV
Withdrawal			Redeemed				per Unit				Redeemed				per Unit				Redeemed				per Unit
April 30, 2017				(2,145.6557	)		$	1,171.59				(262.2532	)		$	1,313.69				—			$	1,339.24
May 31, 2017				(1,574.7402	)			1,162.13				(23.0407	)			1,304.57				(255.3054	)			1,330.22
June 30, 2017				(794.3210	)			1,106.68				(9.3700	)			1,246.45				(66.4160	)			1,271.22
Total				(4,514.7169	)							(294.6639	)							(321.7214	)

 

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: August 11, 2017
	/s/ Michael W. Carter
	Michael W. Carter
	Vice-President
	(Principal Accounting Officer)