10-Q 1 v756944_10q.htm 10-Q

 

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 September 30, 2012

 Commission file number: 000-53453

 

 SENECA GLOBAL FUND, L.P.

 

Organized in Delaware IRS Employer Identification No.:  75-3236572

 

Seneca Global Fund, L.P.

c/o Steben & Company, Inc.

2099 Gaither Road, Suite 200

Rockville, Maryland 20850

(240) 631-7600

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer ¨ Smaller Reporting Company x

 

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

Yes ¨ No x

 

 
 

 

Part I: Financial Information

Item 1. Financial Statements

 

Seneca Global Fund, L.P.

Statements of Financial Condition

September 30, 2012 (Unaudited) and December 31, 2011 (Audited)

 

   September 30,
2012
   December 31,
2011
 
Assets          
Equity in broker trading accounts          
Cash  $20,454,144   $15,373,302 
Net unrealized gain (loss) on open futures contracts   (82,327)   1,184,851 
Net unrealized gain on open forward currency contracts   69,824    18,907 
Total equity in broker trading accounts   20,441,641    16,577,060 
Cash and cash equivalents   1,350,271    3,134,401 
Investments in securities, at fair value   35,115,229    44,281,549 
Certificates of deposit, at fair value   3,007,037    2,951,285 
Total assets  $59,914,178   $66,944,295 
           
Liabilities and Partners’ Capital (Net Asset Value)          
Liabilities          
Trading Advisor management fee payable  $70,727   $78,262 
Commissions and other trading fees payable on open contracts   9,829    9,096 
Cash Manager fees payable   11,257    16,476 
General Partner fee payable   73,695    80,898 
Selling Agent fees payable – General Partner   33,787    39,572 
Administrative expenses payable – General Partner   47,252    51,851 
Offering expenses payable – General Partner   35,381    40,449 
Broker dealer custodial fee payable – General Partner   4,920    6,169 
Broker dealer servicing fee payable – General Partner   3,351    3,715 
Redemptions payable   443,153    528,168 
Subscriptions received in advance   335,069    1,426,321 
Total liabilities   1,068,421    2,280,977 
Partners’ Capital (Net Asset Value)          
General Partner Units – 6,484.1437 units outstanding at September 30, 2012 and December 31, 2011   722,681    776,710 
Series A Units –  255,104.9642 and 269,518.2687 units outstanding at September 30, 2012 and December 31, 2011, respectively   20,045,371    23,528,145 
Series B Units –  126,744.7058 and 140,857.9391 units outstanding at September 30, 2012 and December 31, 2011, respectively   11,215,516    13,684,883 
Series C Units –  23,129.0145 and no units outstanding at September 30, 2012 and December 31, 2011, respectively   2,246,468    -- 
Series I Units –  239,128.8432 and 237,052.9763 units outstanding at September 30, 2012 and December 31, 2011, respectively   24,615,721    26,673,580 
Total partners’ capital (net asset value)   58,845,757    64,663,318 
Total liabilities and partners’ capital (net asset value)  $59,914,178   $66,944,295 

 

The accompanying notes are an integral part of these financial statements.

 

1
 

 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments

September 30, 2012

(Unaudited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
INVESTMENTS IN SECURITIES           
U.S. Treasury Securities           
Face Value   Maturity Date   Name   Yield1           
$175,000    10/31/12   U.S. Treasury Note   3.88%  $178,372    0.30%
 325,000    1/15/13   U.S. Treasury Note   1.38%   327,118    0.56%
 300,000    2/15/13   U.S. Treasury Note   1.38%   301,910    0.51%
 125,000    2/28/13   U.S. Treasury Note   0.63%   125,317    0.21%
 1,100,000    5/31/13   U.S. Treasury Note   3.50%   1,137,137    1.95%
 400,000    6/30/13   U.S. Treasury Note   3.38%   412,943    0.70%
 800,000    7/31/13   U.S. Treasury Note   3.38%   825,736    1.40%
 500,000    8/15/13   U.S. Treasury Note   4.25%   520,409    0.88%
 500,000    8/15/13   U.S. Treasury Note   0.75%   502,940    0.85%
 400,000    11/15/13   U.S. Treasury Note   0.50%   402,068    0.68%
 400,000    12/31/13   U.S. Treasury Note   0.13%   399,704    0.68%
Total U.S. Treasury securities (cost:  $5,174,813)    5,133,654    8.72%
                          
U.S. Government Sponsored Enterprise Notes           
Face Value   Maturity Date   Name   Yield1           
$200,000    1/16/13   Federal Home Loan Bank   1.50%   201,381    0.34%
 200,000    1/29/13   Federal Home Loan Bank   0.38%   200,257    0.34%
 250,000    9/4/14   Federal Home Loan Bank   0.45%   250,088    0.42%
 250,000    10/30/12   Federal National Mortgage Assoc.   0.50%   250,573    0.43%
 500,000    10/30/12   Federal National Mortgage Assoc.   0.50%   501,186    0.85%
 250,000    8/9/13   Federal National Mortgage Assoc.   0.50%   250,800    0.43%
Total U.S. government sponsored enterprise notes (cost:  $1,658,670)    1,654,285    2.81%
                          
U.S. Commercial Paper           
Face Value   Maturity Date   Name   Yield1           
Automotive           
$200,000    10/4/12   BMW US Capital, LLC   0.15%   199,998    0.35%
 200,000    11/15/12   Toyota Motor Credit Corporation   0.18%   199,955    0.35%
Banks                        
 200,000    11/20/12   HSBC USA Inc.   0.30%   199,918    0.35%
 250,000    10/24/12   Mizuho Funding LLC   0.24%   249,963    0.42%
 220,000    10/12/12   UBOC Insurance Inc   0.29%   219,982    0.38%
Beverages           
 250,000    11/7/12   Anheuser-Busch InBev Worldwide Inc.   0.25%   249,937    0.42%
Diversified Financial Services           
 250,000    12/14/12   ING (U.S.) Funding LLC   0.30%   249,848    0.42%
 250,000    10/31/12   River Fuel Funding Company #3, Inc.   0.19%   249,962    0.42%
Energy           
 250,000    10/9/12   Devon Energy Corporation   0.25%   249,986    0.42%
 200,000    10/9/12   Motiva Enterprises LLC   0.18%   199,992    0.35%
 250,000    10/3/12   NextEra Energy Capital Holdings, Inc.   0.42%   249,994    0.42%
 250,000    10/1/12   Oglethorpe Power Corp.   0.35%   250,000    0.42%
 250,000    10/10/12   ONEOK, Inc.   0.40%   249,975    0.42%

 

The accompanying notes are an integral part of these financial statements.

 

2
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

September 30, 2012

(Unaudited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
U.S. Commercial Paper (continued)           
Face Value   Maturity Date   Name   Yield1           
Healthcare                        
$250,000    10/2/12   Roche Holdings, Inc.   0.12%  $249,999    0.42%
Total U.S. commercial paper (cost:  $3,268,831)    3,269,509    5.56%
                          
Foreign Commercial Paper           
Face Value    Maturity Date   Name   Yield1           
Banks           
$250,000    11/30/12   Commonwealth Bank of Australia   0.18%   249,926    0.42%
 250,000    2/1/13   DBS Bank Ltd.   0.89%   249,800    0.42%
 120,000    11/28/12   Oversea-Chinese Banking Corp. Ltd   0.20%   119,961    0.21%
Consumer Products           
 250,000    3/5/13   Reckitt Benckiser Treasury Services PLC   0.75%   249,646    0.42%
Diversified Financial Services           
 250,000    10/5/12   John Deere Bank SA   0.18%   249,996    0.43%
Multinational           
 250,000    11/16/12   Corporacion Andina de Fomento   0.24%   249,925    0.42%
Telecommunication           
 250,000    10/15/12   Telstra Corporation Limited   0.22%   249,980    0.43%
Total foreign commercial paper (cost: $1,615,477)    1,619,234    2.75%
                          
Total commercial paper (cost: $4,884,309)    4,888,743    8.31%
                          
U.S. Corporate Notes           
Face Value   Maturity Date   Name   Yield1           
Aerospace           
$225,000    11/20/12   Boeing   1.88%   227,018    0.39%
 600,000    12/2/13   United Technologies Corp.   0.69%   602,719    1.03%
Agriculture           
 200,000    3/1/13   Archer-Daniels-Midland Company   7.13%   206,725    0.35%
Apparel           
 75,000    8/23/13   V.F. Corporation   1.18%   75,593    0.13%
Automotive           
 450,000    7/31/15   Daimler Finance North America LLC   1.30%   452,743    0.77%
Banks           
 200,000    1/30/14   Bank of America   1.87%   202,093    0.34%
 148,000    4/1/14   Citigroup Inc.   1.39%   148,368    0.25%
 250,000    10/30/12   GMAC Inc.   1.75%   252,143    0.43%
 300,000    12/19/12   GMAC Inc.   2.20%   303,192    0.52%
 450,000    5/2/14   JPMorgan Chase & Co.   1.14%   453,408    0.77%
 450,000    1/9/14   Morgan Stanley   0.76%   444,778    0.76%
 250,000    11/1/12   The Bank of New York Mellon   4.95%   256,133    0.44%
 150,000    2/7/14   The Goldman Sachs Group, Inc.   1.44%   150,258    0.26%
 200,000    10/30/13   U.S. Bancorp   1.13%   202,390    0.34%
 250,000    8/12/13   UBS AG (USA)   2.25%   254,010    0.43%
 300,000    5/1/13   Wachovia Corporation   5.50%   315,732    0.54%

 

The accompanying notes are an integral part of these financial statements.

 

3
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

September 30, 2012

(Unaudited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
U.S. Corporate Notes (continued)           
Face Value   Maturity Date   Name   Yield1           
Beverages           
$450,000    7/14/14   Anheuser-Busch InBev Worldwide Inc.   0.82%  $453,403    0.77%
 300,000    8/15/13   Coca-Cola Enterprises, Inc.   5.00%   313,808    0.53%
Biotechnology           
 175,000    12/1/14   Gilead Sciences, Inc.   2.40%   182,347    0.31%
Chemical           
 200,000    11/15/12   Praxair, Inc.   1.75%   201,636    0.34%
Computers           
 225,000    4/1/14   Dell Inc.   1.06%   227,331    0.39%
 225,000    5/30/14   Hewlett-Packard   0.82%   223,328    0.38%
 100,000    9/19/14   Hewlett-Packard   1.93%   101,264    0.17%
 550,000    10/15/13   IBM   6.50%   601,496    1.02%
Consumer Products           
 250,000    8/15/14   Procter & Gamble   0.70%   251,804    0.43%
Diversified Financial Services           
 250,000    5/8/14   American Honda Finance Corp.   0.89%   250,916    0.43%
 200,000    8/11/15   American Honda Finance Corp.   1.00%   200,515    0.34%
 200,000    5/24/13   BlackRock, Inc.   0.73%   200,638    0.34%
 45,000    4/1/14   Caterpillar Financial Services   0.75%   45,293    0.08%
 250,000    2/9/15   Caterpillar Financial Services   0.79%   251,497    0.43%
 200,000    12/28/12   General Electric Capital Corporation   2.63%   202,590    0.34%
 200,000    4/7/14   General Electric Capital Corporation   1.09%   201,378    0.34%
 300,000    1/15/14   HSBC Finance Corporation   0.71%   298,572    0.51%
 225,000    10/1/12   John Deere Capital Corporation   5.25%   230,908    0.39%
 200,000    12/17/12   John Deere Capital Corporation   4.95%   204,781    0.35%
 200,000    6/30/13   NYSE Euronext   4.80%   208,782    0.35%
 200,000    4/5/13   PACCAR Financial Corp.   0.68%   200,554    0.34%
 100,000    4/5/13   PACCAR Financial Corp.   0.68%   100,277    0.17%
 225,000    4/14/14   SSIF Nevada, Limited Partnership   1.16%   226,574    0.39%
 200,000    10/12/12   Toyota Motor Credit Corporation   0.66%   200,315    0.34%
 200,000    10/11/13   Toyota Motor Credit Corporation   0.91%   201,231    0.34%
 275,000    2/17/15   Toyota Motor Credit Corporation   1.00%   278,314    0.47%
Energy           
 225,000    10/15/12   ConocoPhillips   4.75%   230,263    0.39%
 250,000    10/31/12   Northern Natural Gas Company   5.38%   256,527    0.44%
 225,000    12/13/13   Occidental Petroleum Corporation   1.45%   228,555    0.39%
 100,000    4/15/13   PSEG Power LLC   2.50%   102,256    0.17%
Food           
 100,000    12/3/12   Kellogg Company   5.13%   102,476    0.17%
Healthcare           
 330,000    3/1/14   Roche Holdings, Inc.   5.00%   244,846    0.42%
Insurance           
 100,000    1/10/14   Berkshire Hathaway Finance Corporation   0.79%   100,663    0.17%
 300,000    2/11/13   Berkshire Hathaway Inc.   0.87%   301,020    0.51%
 100,000    5/8/13   Jackson National Life Global Funding   5.38%   105,086    0.18%
 200,000    4/4/14   MetLife Institutional Funding II   1.36%   202,250    0.34%

 

The accompanying notes are an integral part of these financial statements.

 

4
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

September 30, 2012

(Unaudited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
U.S. Corporate Notes (continued)           
Face Value   Maturity Date   Name   Yield1           
Insurance (continued)           
$200,000    1/11/13   Metropolitan Life Global Funding I   2.50%  $202,209    0.34%
 200,000    4/22/13   Monumental Global Funding III   5.50%   209,245    0.36%
 100,000    10/16/12   New York Life Global Funding   5.25%   102,630    0.17%
 200,000    4/15/13   Pacific Life Global Funding   5.15%   209,734    0.36%
 200,000    9/27/13   Pricoa Global Funding I   0.56%   199,392    0.34%
 100,000    12/14/12   Principal Life Income Fundings   5.30%   102,554    0.17%
Manufacturing           
 435,000    6/21/13   Danaher Corporation   0.63%   435,910    0.74%
Media           
 400,000    4/30/15   NBCUniversal Media, LLC   3.65%   434,009    0.74%
 150,000    12/1/14   The Walt Disney Company   0.88%   152,005    0.26%
 100,000    7/1/13   Time Warner Cable Inc.   6.20%   105,779    0.18%
Pharmaceutical           
 150,000    2/12/15   Express Scripts Holding Company   2.10%   154,306    0.26%
 100,000    3/1/13   McKesson Corporation   5.25%   102,369    0.17%
 225,000    2/10/14   Novartis Capital Corporation   4.13%   237,505    0.40%
 150,000    3/15/13   Pfizer Inc.   5.50%   153,923    0.26%
Retail           
 425,000    7/18/14   Target Corporation   0.63%   427,165    0.73%
 200,000    8/1/13   Walgreen Co.   4.88%   208,679    0.35%
 400,000    3/13/14   Walgreen Co.   0.90%   400,653    0.68%
 225,000    4/15/14   Wal-Mart Stores, Inc.   1.63%   230,834    0.39%
Steel           
 100,000    12/1/12   Nucor Corporation   5.00%   102,353    0.17%
Telecommunications      
 225,000    2/13/15   AT&T Inc.   0.88%   227,169    0.39%
 110,000    3/14/14   Cisco Systems, Inc.   0.64%   110,509    0.19%
 270,000    3/28/14   Verizon Communications Inc.   0.97%   272,107    0.46%
 200,000    3/15/13   Verizon Virginia Inc.   4.63%   204,090    0.35%
Transportation           
 200,000    1/15/13   United Parcel Service, Inc.   4.50%   204,340    0.35%
Total U.S. corporate notes (cost: $17,798,999)    17,670,266    30.03%
                          
Foreign Corporate Notes           
Face Value   Maturity Date   Name   Yield1           
Automotive           
$450,000    4/1/14   Volkswagen International Finance N.V.   1.07%  $453,009    0.77%
Banks           
 200,000    6/28/13   Bank of Montreal   2.13%   203,771    0.35%
 225,000    1/10/14   BNP Paribas   1.36%   225,795    0.38%
 225,000    4/14/14   Danske Bank A/S   1.51%   223,353    0.38%
 250,000    1/18/13   HSBC Bank PLC   0.86%   250,747    0.43%
 450,000    3/15/13   ING Bank N.V.   1.44%   451,724    0.77%
 250,000    6/17/13   KfW Bankengruppe   0.23%   250,038    0.42%
 100,000    11/16/12   National Australia Bank Limited   2.35%   101,121    0.17%

 

The accompanying notes are an integral part of these financial statements.

 

5
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

September 30, 2012

(Unaudited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
Foreign Corporate Notes (continued)           
Face Value   Maturity Date   Name   Yield1           
Banks (continued)           
$225,000    4/11/14   National Australia Bank Limited   1.18%  $227,030    0.39%
 300,000    2/4/13   Rabobank Nederland   0.59%   300,248    0.51%
 250,000    7/29/13   Royal Bank of Canada   2.10%   254,526    0.43%
 270,000    7/26/13   The Toronto-Dominion Bank   0.63%   270,822    0.46%
 100,000    12/14/12   Westpac Banking Corporation   1.90%   100,853    0.17%
 250,000    3/31/14   Westpac Banking Corporation   1.09%   251,430    0.43%
Diversified Financial Services           
 400,000    11/14/14   Canadian Natural Resources Limited   1.45%   408,578    0.69%
 145,000    3/25/13   Shell International Finance B.V.   1.88%   146,187    0.25%
 80,000    3/25/13   Shell International Finance B.V.   1.88%   80,655    0.13%
Multinational           
 200,000    8/1/13   International Finance Corporation   0.33%   200,481    0.34%
Pharmaceutical           
 200,000    3/28/13   Sanofi   0.56%   200,349    0.34%
 210,000    3/28/14   Sanofi   0.67%   210,983    0.36%
 500,000    3/17/15   Takeda Pharmaceutical Co Ltd   1.03%   504,100    0.86%
 450,000    3/21/14   Teva Pharmaceutical Finance III BV   0.88%   452,481    0.77%
Total foreign corporate notes (cost:  $5,767,983)    5,768,281    9.80%
                          
Total corporate notes (cost:  $23,566,982)    23,438,547    39.83%
                          
Total investment in securities (cost:  $35,284,773)   $35,115,229    59.67%
                          
CERTIFICATES OF DEPOSIT           
U.S. Certificates of Deposit           
Face Value   Maturity Date   Name   Yield1           
Banks           
$250,000    1/28/13   Banco del Estado de Chile (NY)   0.60%  $250,424    0.43%
 100,000    8/15/13   Bank of Montreal (Chicago)   0.63%   100,252    0.16%
 250,000    2/11/13   Bank of Tokyo-Mitsubishi UFJ, Ltd. (NY)   0.49%   250,260    0.42%
 250,000    7/26/13   Branch Banking and Trust Company   0.48%   250,273    0.43%
 200,000    7/25/13   Credit Suisse Group AG (NY)   0.94%   200,284    0.34%
 250,000    10/12/12   DZ Bank (NY)   0.76%   250,948    0.43%
 250,000    3/1/13   Mizuho Corporate Bank, Ltd. (NY)   0.46%   250,187    0.42%
 250,000    1/9/13   National Bank of Canada (NY)   0.66%   251,574    0.43%
 250,000    2/8/13   Norinchukin Bank (NY)   0.52%   250,283    0.43%
 250,000    3/1/13   PNC Bank   0.52%   250,271    0.42%
 250,000    1/14/13   Standard Chartered Bank   0.57%   250,379    0.43%
Total U.S. certificates of deposit (cost:  $2,549,739)    2,555,135    4.34%

 

The accompanying notes are an integral part of these financial statements.

 

6
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

September 30, 2012

(Unaudited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
Foreign Certificates of Deposit           
Face Value   Maturity Date   Name   Yield1           
Bank                        
$250,000    4/11/13   Sumitomo Mitsui Banking Corp.   0.80%  $251,431    0.43%
 200,000    9/16/13   The Bank of Nova Scotia   0.57%   200,471    0.34%
Total foreign certificates of deposit (cost:  $450,244)    451,902    0.77%
                          
Total certificates of deposit (cost:  $2,999,982)   $3,007,037    5.11%
                          
OPEN FUTURES CONTRACTS           
Long U.S. Futures Contracts           
          Agricultural commodities       $(79,778)   (0.14)%
          Currencies        161,641    0.27%
          Energy        103,366    0.18%
          Equity indices        (108,469)   (0.18)%
          Interest rate instruments        186,884    0.32%
          Metals2        1,847,964    3.14%
Net unrealized gain on open long U.S. futures contracts    2,111,608    3.59%
                          
Short U.S. Futures Contracts           
          Agricultural commodities        11,160    0.02%
          Currencies        (32,757)   (0.06)%
          Energy        73,960    0.13%
          Equity indices        1,500    0.00%
          Metals2        (1,972,987)   (3.35)%
Net unrealized loss on open short U.S. futures contracts    (1,919,124)   (3.26)%
                          
Total U.S. futures contracts - net unrealized gain on open U.S. futures contracts    192,484    0.33%
                          
Long Foreign Futures Contracts           
          Agricultural commodities        12,744    0.02%
          Currencies        (55,107)   (0.09)%
          Equity indices        (492,135)   (0.84)%
          Interest rate instruments        331,991    0.56%
Net unrealized loss on open long foreign futures contracts    (202,507)   (0.35)%

 

The accompanying notes are an integral part of these financial statements.

 

7
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

September 30, 2012

(Unaudited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
Short Foreign Futures Contracts           
          Agricultural commodities       $6,738    0.01%
          Equity indices        (62,973)   (0.11)%
          Interest rate instruments        (16,069)   (0.03)%
Net unrealized loss on open short foreign futures contracts    (72,304)   (0.13)%
                          
Total foreign futures contracts - net unrealized loss on open foreign futures contracts    (274,811)   (0.48)%
                          
Net unrealized loss on open futures contracts   $(82,327)   (0.15)%
                          
OPEN FORWARD CURRENCY CONTRACTS           
U.S. Forward Currency Contracts           
          Long       $46,359    0.08%
          Short        (6,968)   (0.01)%
Net unrealized gain on open U.S. forward currency contracts    39,391    0.07%
                          
Foreign Forward Currency Contracts           
          Long        (8,286)   (0.01)%
          Short        38,719    0.07%
Net unrealized gain on open foreign forward currency contracts    30,433    0.06%
                          
Net unrealized gain on open forward currency contracts   $69,824    0.13%

 

1 Represents the annualized yield at date of purchase for discount securities, the stated coupon rate for coupon-bearing securities, or the stated interest rate for certificates of deposit.

 

2 No individual futures or forward currency contract position constituted one percent or greater of partners’ capital (net asset value). Accordingly, the number of contracts and expiration dates are not presented.

 

The accompanying notes are an integral part of these financial statements.

 

8
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments

December 31, 2011

(Audited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
INVESTMENTS IN SECURITIES           
U.S. Treasury Securities           
Face Value   Maturity Date   Name   Yield1           
$450,000    3/8/12   U.S. Treasury Bill   0.20%  $449,982    0.70%
 500,000    4/30/12   U.S. Treasury Note   4.50%   511,041    0.79%
 675,000    6/15/12   U.S. Treasury Note   1.88%   681,102    1.05%
 300,000    7/31/12   U.S. Treasury Note   4.63%   309,677    0.48%
 100,000    9/30/12   U.S. Treasury Note   0.38%   100,287    0.16%
 450,000    10/31/12   U.S. Treasury Note   3.88%   466,826    0.72%
 200,000    11/15/12   U.S. Treasury Note   1.38%   202,490    0.31%
 300,000    11/30/12   U.S. Treasury Note   0.50%   301,092    0.47%
 100,000    1/15/13   U.S. Treasury Note   1.38%   101,878    0.16%
 300,000    2/15/13   U.S. Treasury Note   1.38%   305,554    0.47%
Total U.S. Treasury securities (cost:  $3,460,043)    3,429,929    5.31%
                          
U.S. Government Sponsored Enterprise Notes           
Face Value   Maturity Date   Name   Yield1           
$250,000    4/2/12   Federal Home Loan Bank   0.17%   250,035    0.39%
 250,000    6/20/12   Federal Home Loan Bank   1.88%   252,129    0.39%
 250,000    6/27/12   Federal Home Loan Bank   0.25%   250,098    0.39%
 300,000    7/25/12   Federal Home Loan Bank   0.25%   300,457    0.46%
 250,000    8/10/12   Federal Home Loan Bank   0.35%   250,183    0.39%
 600,000    8/22/12   Federal Home Loan Bank   1.75%   609,527    0.94%
 200,000    1/16/13   Federal Home Loan Bank   1.50%   203,858    0.32%
 250,000    7/10/12   Federal Home Loan Mortgage Corp.   0.18%   249,935    0.39%
 500,000    1/9/13   Federal Home Loan Mortgage Corp.   1.38%   509,053    0.79%
 250,000    9/23/13   Federal Home Loan Mortgage Corp.   0.55%   250,068    0.39%
 250,000    9/30/13   Federal Home Loan Mortgage Corp.   0.55%   250,143    0.39%
 400,000    5/18/12   Federal National Mortgage Association   4.88%   409,703    0.63%
 250,000    7/16/12   Federal National Mortgage Association   0.18%   249,933    0.39%
 200,000    7/30/12   Federal National Mortgage Association   1.13%   202,018    0.31%
 750,000    10/30/12   Federal National Mortgage Association   0.50%   752,219    1.16%
Total U.S. government sponsored enterprise notes (cost:  $5,013,078)    4,989,359    7.73%
                          
Foreign Government Sponsored Enterprise Notes           
Face Value   Maturity Date   Name   Yield1           
$200,000    1/23/12   African Development Bank   1.88%   201,791    0.31%
 200,000    3/21/12   European Investment Bank   4.63%   204,235    0.32%
 250,000    6/11/12   Soc. de Financement de l'Economie Fr.   2.25%   251,279    0.39%
Total foreign government sponsored enterprise notes (cost:  $667,015)    657,305    1.02%
                          
Total government sponsored enterprise notes (cost $5,680,093)    5,646,664    8.75%
                          
U.S. Commercial Paper           
Face Value   Maturity Date   Name   Yield1           
Automotive           
$250,000    1/9/12   BMW US Capital, LLC   0.38%   249,979    0.39%

 

The accompanying notes are an integral part of these financial statements.

 

9
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

December 31, 2011

(Audited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
U.S. Commercial Paper (continued)           
Face Value   Maturity Date   Name   Yield1           
Banks           
$200,000    1/25/12   Bank of Tokyo-Mitsubishi (NY)   0.29%  $199,961    0.31%
 200,000    2/15/12   Credit Suisse (USA), Inc.   0.45%   199,888    0.31%
 150,000    3/19/12   Goldman Sachs   0.55%   149,821    0.23%
 150,000    1/27/12   HSBC USA Inc.   0.20%   149,966    0.23%
 250,000    1/4/12   Standard Chartered Bank (NY)   0.20%   249,995    0.39%
 200,000    2/6/12   Union Bank, NA   0.18%   199,964    0.31%
Beverages           
 250,000    2/2/12   Anheuser-Busch InBev Worldwide Inc.   0.25%   249,944    0.39%
Charity           
 150,000    1/25/12   Salvation Army   0.10%   149,990    0.23%
Diversified Financial Services           
 150,000    1/18/12   American Honda Finance Corp.   0.17%   149,988    0.23%
 250,000    1/11/12   General Electric Capital Corp.   0.14%   249,999    0.39%
 200,000    2/27/12   ING (U.S.) Funding LLC   0.35%   199,889    0.31%
 200,000    1/6/12   Nordea Invest Mgmt North America, Inc.   0.32%   199,991    0.31%
 250,000    1/9/12   PACCAR Financial Corp.   0.08%   249,996    0.39%
 250,000    2/15/12   Private Export Funding Corp.   0.11%   249,966    0.39%
 150,000    1/13/12   River Fuel Trust 1   0.35%   149,980    0.23%
Energy           
 270,000    1/11/12   NextEra Energy   0.50%   269,966    0.42%
 300,000    1/12/12   Oglethorpe Power Corp.   0.17%   299,984    0.46%
 250,000    1/11/12   Southern Company   0.17%   249,988    0.39%
Food           
 250,000    1/5/12   Kellogg Company   0.19%   249,995    0.39%
Insurance           
 200,000    1/10/12   Metlife Funding, Inc.   0.07%   199,995    0.31%
Total U.S. commercial paper (cost:  $4,518,227)    4,519,245    7.01%
                          
Foreign Commercial Paper           
Face Value   Maturity Date   Name   Yield1           
Banks           
$250,000    2/7/12   Australia and New Zealand Banking Group   0.25%   249,936    0.39%
 250,000    1/6/12   John Deere Bank SA   0.10%   249,997    0.39%
 250,000    1/17/12   Mizuho Funding LLC   0.20%   249,978    0.39%
 250,000    3/8/12   Oversea-Chinese Banking Corp. Ltd   0.53%   249,753    0.39%
 250,000    1/27/12   Sumitomo Mitsui Banking Corp.   0.24%   249,957    0.39%
Consumer Products           
 250,000    1/4/12   Reckitt Benckiser   0.30%   249,994    0.39%
Energy           
 250,000    1/4/12   BP Capital Markets   0.19%   249,995    0.39%
 250,000    2/1/12   GDF Suez   0.19%   249,959    0.39%
 250,000    1/5/12   Pacific Gas and Electric   0.55%   249,985    0.39%

 

The accompanying notes are an integral part of these financial statements.

 

10
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

December 31, 2011

(Audited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
Foreign Commercial Paper (continued)           
Face Value   Maturity Date   Name   Yield1           
Government Sponsored Enterprise           
$250,000    2/14/12   Corporacion Andina de Fomento   0.33%  $249,899    0.39%
Healthcare           
 250,000    1/10/12   Covidien International Finance S.A.   0.21%   249,987    0.39%
Total foreign commercial paper (cost: $2,748,761)    2,749,440    4.29%
                          
Total commercial paper (cost: $7,266,988)    7,268,685    11.30%
                          
U.S. Corporate Notes           
Face Value   Maturity Date   Name   Yield1           
Aerospace           
$225,000    11/20/12   Boeing   1.88%   227,826    0.35%
 200,000    4/1/12   McDonnell Douglas   9.75%   209,283    0.32%
Agriculture           
 200,000    8/13/12   Archer-Daniels-Midland   0.61%   200,488    0.31%
Apparel           
 75,000    8/23/13   V.F. Corporation   1.25%   75,229    0.12%
Banks           
 450,000    1/30/14   Bank of America   1.85%   407,722    0.63%
 250,000    11/1/12   Bank of New York Mellon   4.95%   261,274    0.40%
 300,000    7/27/12   BB&T   3.85%   309,835    0.48%
 450,000    4/1/14   Citigroup   1.30%   425,538    0.66%
 200,000    7/2/12   Credit Suisse AG (NY)   3.45%   205,652    0.32%
 450,000    1/14/14   Credit Suisse AG (NY)   1.36%   436,874    0.68%
 100,000    1/15/12   Credit Suisse (USA), Inc.   6.50%   103,179    0.16%
 250,000    10/30/12   GMAC   1.75%   253,966    0.39%
 300,000    12/19/12   GMAC   2.20%   305,941    0.47%
 150,000    1/15/12   Goldman Sachs   6.60%   154,762    0.24%
 250,000    2/6/12   Goldman Sachs   0.62%   249,863    0.39%
 505,000    2/7/14   Goldman Sachs   1.44%   473,147    0.73%
 450,000    5/2/14   JPMorgan Chase   1.30%   436,994    0.68%
 225,000    4/29/13   Morgan Stanley   1.41%   212,595    0.33%
 450,000    1/9/14   Morgan Stanley   0.69%   407,852    0.63%
 300,000    10/23/12   Wells Fargo & Company   5.25%   313,498    0.48%
 200,000    1/31/13   Wells Fargo & Company   4.38%   210,370    0.33%
Beverages           
 450,000    7/14/14   Anheuser-Busch InBev Worldwide Inc.   0.76%   448,582    0.69%
 100,000    3/1/12   Coca-Cola Enterprises, Inc.   3.75%   101,694    0.16%
 300,000    8/15/13   Coca-Cola Enterprises, Inc.   5.00%   324,729    0.50%
Chemical           
 200,000    11/15/12   Praxair, Inc.   1.75%   202,153    0.31%

 

The accompanying notes are an integral part of these financial statements.

 

11
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

December 31, 2011

(Audited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
U.S. Corporate Notes (continued)           
Face Value   Maturity Date   Name   Yield1           
Computers           
$450,000    4/1/14   Dell Inc.   0.97%  $453,785    0.70%
 200,000    3/1/12   Hewlett-Packard Company   0.64%   200,019    0.31%
 225,000    5/30/14   Hewlett-Packard Company   0.92%   217,726    0.34%
 100,000    9/19/14   Hewlett-Packard Company   2.11%   99,587    0.15%
 550,000    10/15/13   IBM   6.50%   614,082    0.95%
Consumer Products           
 250,000    8/15/14   Procter & Gamble   0.70%   251,880    0.39%
 150,000    2/15/12   Kimberly-Clark Corporation   5.63%   153,999    0.24%
Diversified Financial Services           
 250,000    6/29/12   American Honda Finance Corp.   0.68%   249,940    0.39%
 200,000    5/24/13   BlackRock   0.81%   200,049    0.31%
 200,000    4/5/13   Caterpillar Financial Services   2.00%   204,450    0.32%
 45,000    4/1/14   Caterpillar Financial Services   0.66%   45,018    0.07%
 250,000    10/22/12   Citigroup Funding Inc.   1.88%   254,338    0.39%
 250,000    12/10/12   Citigroup Funding Inc.   2.25%   254,971    0.39%
 200,000    12/28/12   General Electric Capital Corp.   2.63%   204,831    0.32%
 200,000    1/8/13   General Electric Capital Corp.   2.80%   206,491    0.32%
 450,000    1/15/14   HSBC Finance Corp.   0.65%   415,162    0.64%
 200,000    3/15/12   John Deere Capital Corp.   7.00%   206,845    0.32%
 225,000    10/1/12   John Deere Capital Corp.   5.25%   235,792    0.36%
 200,000    12/17/12   John Deere Capital Corp.   4.95%   208,736    0.32%
 300,000    7/16/12   Massmutual Global Funding II   3.63%   309,515    0.48%
 300,000    4/5/13   PACCAR Financial Corp.   0.72%   299,863    0.46%
 200,000    2/15/12   Principal Life Global Funding I   6.25%   205,904    0.32%
 225,000    4/14/14   SSIF Nevada, LP   1.10%   221,978    0.34%
 200,000    10/12/12   Toyota Motor Credit Corp.   0.59%   200,339    0.31%
Energy                        
 225,000    10/15/12   ConocoPhillips   4.75%   233,975    0.36%
 450,000    1/15/12   Duke Energy Carolinas, LLC   6.25%   463,685    0.72%
 250,000    10/31/12   Northern Natural Gas Company   5.38%   261,669    0.40%
 225,000    12/13/13   Occidental Petroleum   1.45%   229,064    0.35%
Food           
 200,000    9/15/12   Cargill, Incorporated   5.60%   209,344    0.32%
Healthcare           
 230,000    3/1/14   Roche Holdings, Inc.   5.00%   252,648    0.39%
Insurance           
 100,000    1/10/14   Berkshire Hathaway Finance Corp.   0.72%   99,623    0.15%
 300,000    2/11/13   Berkshire Hathaway Inc.   0.88%   301,371    0.47%
 115,000    5/30/12   Jackson National Life Global Funding   6.13%   117,763    0.18%
 250,000    4/4/14   MetLife Institutional Funding II   1.27%   250,248    0.39%
 300,000    9/17/12   Metropolitan Life Global Funding I   2.88%   306,413    0.47%
 200,000    1/11/13   Metropolitan Life Global Funding I   2.50%   204,784    0.32%
 200,000    8/22/12   New York Life Global Funding   0.54%   200,081    0.31%
 100,000    10/16/12   New York Life Global Funding   5.25%   104,803    0.16%

 

The accompanying notes are an integral part of these financial statements.

 

12
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

December 31, 2011

(Audited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
U.S. Corporate Notes (continued)           
Face Value   Maturity Date   Name   Yield1           
Insurance (continued)           
$200,000    12/14/12   New York Life Global Funding   2.25%  $202,865    0.31%
 200,000    4/15/13   Pacific Life Global Funding   5.15%   211,079    0.33%
 200,000    6/25/12   Pricoa Global Funding I   4.63%   203,339    0.31%
 100,000    12/14/12   Principal Life Income Fundings   5.30%   104,330    0.16%
 200,000    6/15/12   Travelers Companies, Inc.   5.38%   204,336    0.32%
Media           
 300,000    3/1/12   Walt Disney Company   6.38%   309,077    0.48%
 150,000    12/1/14   Walt Disney Company   0.88%   150,808    0.23%
Manufacturing           
 435,000    6/21/13   Danaher Corporation   0.82%   435,743    0.67%
Pharmaceuticals           
 225,000    2/10/14   Novartis Capital Corporation   4.13%   244,369    0.38%
 150,000    3/15/13   Pfizer Inc.   5.50%   160,995    0.25%
Retail           
 250,000    3/15/12   Costco Wholesale Corporation   5.30%   256,217    0.40%
 425,000    7/18/14   Target Corporation   0.57%   425,487    0.66%
 225,000    4/15/14   Wal-Mart Stores, Inc.   1.63%   230,723    0.36%
Semiconductor           
 200,000    5/15/13   Texas Instruments Incorporated   0.64%   200,568    0.31%
Steel           
 100,000    12/1/12   Nucor Corporation   5.00%   104,019    0.16%
Telecommunications           
 110,000    3/14/14   Cisco Systems, Inc.   0.79%   109,963    0.17%
 270,000    3/28/14   Verizon Communications Inc.   1.18%   269,691    0.42%
Total U.S. corporate notes (cost: $20,299,965)    19,933,426    30.81%
                          
Foreign Corporate Notes           
Face Value   Maturity Date   Name   Yield1           
Automotive           
$450,000    4/1/14   Volkswagen International Finance N.V.   0.98%   442,119    0.68%
Banks           
 200,000    12/21/12   ANZ National (Int'l) Limited   2.38%   203,584    0.31%
 450,000    1/10/14   BNP Paribas   1.29%   416,343    0.64%
 250,000    6/29/12   Commonwealth Bank of Australia   0.78%   249,803    0.39%
 450,000    3/17/14   Commonwealth Bank of Australia   1.29%   443,000    0.69%
 225,000    4/14/14   Danske Bank A/S   1.45%   217,582    0.34%
 100,000    8/3/12   HSBC Bank PLC   0.88%   100,208    0.15%
 250,000    1/18/13   HSBC Bank PLC   0.80%   249,489    0.39%
 300,000    1/13/12   ING Bank N.V.   1.03%   300,654    0.46%
 450,000    3/15/13   ING Bank N.V.   1.60%   439,859    0.68%
 250,000    6/17/13   KfW Bankengruppe   0.29%   249,908    0.39%
 200,000    6/15/12   National Australia Bank Limited   0.75%   200,103    0.31%
 100,000    11/16/12   National Australia Bank Limited   2.35%   101,380    0.16%
 225,000    4/11/14   National Australia Bank Limited   1.11%   223,308    0.35%

 

The accompanying notes are an integral part of these financial statements.

 

13
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

December 31, 2011

(Audited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
Foreign Corporate Notes (continued)           
Face Value   Maturity Date   Name   Yield1           
Banks (continued)           
$300,000    2/4/13   Rabobank Nederland   0.58%  $300,199    0.46%
 300,000    12/12/12   Royal Bank of Canada   0.69%   300,424    0.46%
 250,000    3/8/13   Royal Bank of Canada   0.69%   250,168    0.39%
 200,000    5/11/12   Royal Bank of Scotland PLC   2.63%   202,009    0.31%
 270,000    7/26/13   Toronto-Dominion Bank   0.60%   269,910    0.42%
 190,000    11/1/13   Toronto-Dominion Bank   0.89%   190,674    0.29%
 100,000    12/14/12   Westpac Banking Corporation   1.90%   101,010    0.16%
 250,000    3/31/14   Westpac Banking Corporation   1.31%   250,735    0.39%
Energy           
 425,000    3/10/12   BP Capital Markets P.L.C.   3.13%   431,049    0.67%
 225,000    3/25/13   Shell International Finance B.V.   1.88%   230,317    0.36%
Mining           
 250,000    3/29/12   BHP Billiton Finance (USA) Limited   5.13%   256,031    0.40%
Pharmaceuticals           
 550,000    3/28/13   Sanofi   0.77%   550,570    0.85%
 210,000    3/28/14   Sanofi   0.88%   209,726    0.32%
 450,000    3/21/14   Teva Pharmaceutical Finance III BV   1.07%   447,533    0.69%
Telecommunications           
 175,000    2/27/12   Vodafone Group PLC   0.79%   175,150    0.27%
Total foreign corporate notes (cost:  $8,097,611)    8,002,845    12.38%
                          
Total corporate notes (cost:  $28,397,576)    27,936,271    43.19%
                          
Total investment in securities (cost:  $44,804,700)   $44,281,549    68.55%
                          
CERTIFICATES OF DEPOSIT           
U.S. Certificates of Deposit      
Face Value   Maturity Date   Name   Yield1           
Banks           
$250,000    1/17/12   Bank of Tokyo-Mitsubishi (NY)   0.36%  $250,444    0.39%
 250,000    4/4/12   Deutsche Bank Aktiengesellschaft (NY)   0.45%   250,609    0.39%
 200,000    11/13/12   Nordea Bank Finland PLC (NY)   0.65%   199,168    0.31%
 250,000    3/1/13   PNC Bank   0.63%   248,172    0.38%
 250,000    2/3/12   Shizuoka Bank, Ltd. (NY)   0.49%   250,234    0.39%
 300,000    4/25/12   UBS AG (NY)   0.55%   301,003    0.47%
 250,000    5/3/12   Westpac Banking Corp. (NY)   0.40%   250,669    0.39%
Total U.S. certificates of deposit (cost:  $1,749,630)    1,750,299    2.72%

 

The accompanying notes are an integral part of these financial statements.

 

14
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

December 31, 2011

(Audited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
Foreign Certificates of Deposit           
Face Value   Maturity Date   Name   Yield1           
Banks           
$250,000    1/17/12   Bank of Nova Scotia   0.32%  $250,600    0.39%
 200,000    6/11/12   Bank of Nova Scotia   0.74%   200,115    0.31%
 250,000    11/20/12   Bank of Nova Scotia   0.74%   250,379    0.39%
 250,000    1/24/12   Svenska Handelsbanken AB   0.38%   250,187    0.39%
Government Sponsored Enterprise           
 250,000    5/25/12   Caisse Amortissement de la Dette Socia   0.43%   249,705    0.39%
Total foreign certificates of deposit (cost:  $1,200,564)    1,200,986    1.87%
                          
Total certificates of deposit (cost:  $2,950,195)   $2,951,285    4.59%
                          
OPEN FUTURES CONTRACTS           
Long U.S. Futures Contracts           
          Agricultural commodities       $29,095    0.04%
          Currencies        61,569    0.10%
          Energy        19,162    0.03%
          Equity indices        13,888    0.02%
          Interest rate instruments        41,490    0.06%
          Metals        (318,784)   (0.49)%
Net unrealized loss on open long U.S. futures contracts    (153,580)   (0.24)%
                          
Short U.S. Futures Contracts           
          Agricultural commodities        (346,033)   (0.54)%
          Currencies        60,821    0.09%
          Energy        191,030    0.30%
          Equity indices        20,049    0.03%
          Interest rate instruments        (18,963)   (0.03)%
          Metals        136,750    0.21%
Net unrealized gain on open short U.S. futures contracts    43,654    0.06%
                          
Total U.S. futures contracts - net unrealized loss on open U.S. futures contracts    (109,926)   (0.18)%
                          
Long Foreign Futures Contracts           
          Equity indices        68,689    0.11%
          Interest rate instruments 2        695,322    1.08%
Net unrealized gain on open long foreign futures contracts    764,011    1.19%

 

The accompanying notes are an integral part of these financial statements.

 

15
 

 

Seneca Global Fund, L.P.

Condensed Schedule of Investments (continued)

December 31, 2011

(Audited)

 

        Description      Fair Value   % of
Partners'
Capital
(Net Asset
Value)
 
Short Foreign Futures Contracts           
            Agricultural commodities     $87,815    0.14%
          Currencies        429,186    0.66%
          Equity indices        88,959    0.14%
          Interest rate instruments        (75,194)   (0.12)%
Net unrealized gain on open short foreign futures contracts    530,766    0.82%
                          
Total foreign futures contracts - net unrealized gain on open foreign futures contracts    1,294,777    2.01%
                          
Net unrealized gain on open futures contracts   $1,184,851    1.83%
                          
OPEN FORWARD CURRENCY CONTRACTS           
U.S. Forward Currency Contracts           
          Long       $5,784    0.01%
          Short        7,277    0.01%
Net unrealized gain on open U.S. forward currency contracts    13,061    0.02%
                          
Foreign Forward Currency Contracts           
          Long        (35,591)   (0.06)%
          Short        41,437    0.06%
Net unrealized gain on open foreign forward currency contracts    5,846    0.00%
                          
Net unrealized gain on open forward currency contracts   $18,907    0.02%

 

1 Represents the annualized yield at date of purchase for discount securities, the stated coupon rate for coupon-bearing securities, or the stated interest rate for certificates of deposit.

 

2 No individual futures or forward currency contract position constituted one percent or greater of partners’ capital (net asset value). Accordingly, the number of contracts and expiration dates are not presented.

 

The accompanying notes are an integral part of these financial statements.

 

16
 

 

 

Seneca Global Fund, L.P.

Statements of Operations

For the Three and Nine Months Ended September 30, 2012 and 2011

(Unaudited)

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2012   2011   2012   2011 
Trading Gain (Loss) from Futures and Forwards                    
Net realized gain (loss)  $(2,179,600)  $4,666,374   $(2,390,177)  $5,659,134 
Net change in unrealized gain (loss)   2,207,718    3,892,871    (1,216,261)   758,892 
Brokerage commissions and trading expenses   (47,242)   (42,253)   (156,726)   (120,583)
Net gain (loss) from futures and forwards trading   (19,124)   8,516,992    (3,763,164)   6,297,443 
                     
Net Investment Loss                    
Income                    
Interest income   166,665    161,286    487,019    310,930 
Net realized and change in unrealized gain (loss) on securities and certificates of deposit   (13,057)   (369,570)   62,156    (455,796)
Total income   153,608    (208,284)   549,175    (144,866)
Expenses                    
Trading Advisor management fees   224,599    231,307    691,294    839,223 
Trading Advisor incentive fees       893,861    73,650    1,165,512 
Cash Manager fees   11,680    13,826    34,997    31,369 
General Partner fee   228,803    246,510    716,348    605,852 
Selling Agent fees – General Partner   113,293    116,117    357,447    307,488 
Broker dealer custodial fee – General Partner   15,332    19,633    50,089    57,105 
Broker dealer servicing fee – General Partner   10,981    11,534    34,546    30,685 
Administrative expenses – General Partner   185,946    260,518    644,646    854,820 
Offering expenses – General Partner   177,849    195,664    457,364    501,023 
Total expenses   968,483    1,988,970    3,060,381    4,393,077 
Administrative and offering expenses waived   (104,177)   (175,062)   (286,174)   (576,074)
Net total expenses   864,306    1,813,908    2,774,207    3,817,003 
Net investment loss   (710,698)   (2,022,192)   (2,225,032)   (3,961,869)
Net Income (Loss)  $(729,822)  $6,494,800   $(5,988,196)  $2,335,574 

 

The accompanying notes are an integral part of these financial statements.

  

17
 

 

Seneca Global Fund, L.P.

Statements of Operations (continued)

For the Three and Nine Months Ended September 30, 2012 and 2011

(Unaudited)

 

   Series A   Series B   Series C   Series I   General
Partner
 
Three Months Ended September 30, 2012                         
Decrease in net asset value per unit  $(1.28)  $(1.09)  $(2.87)  $(1.11)  $(0.57)
Net loss per unit†  $(1.02)  $(1.02)  $(2.86)  $(1.06)  $(0.57)
Weighted average number of units outstanding   269,268.9265    127,887.1111    23,949.7363    238,144.2662    6,484.1437 
                          
Three Months Ended September 30, 2011                         
Increase in net asset value per unit  $9.11   $10.54   $   $12.32   $13.78 
Net income per unit†  $9.39   $10.67   $   $12.60   $14.31 
Weighted average number of units outstanding   233,227.3112    138,375.6339        218,388.6612    5,431.6882 

 

   Series A   Series B   Series C   Series I   General
Partner
 
Nine Months Ended September 30, 2012                         
Decrease in net asset value per unit  $(8.72)  $(8.66)  $(2.87)  $(9.58)  $(8.34)
Net loss per unit†  $(8.81)  $(8.49)  $(2.86)  $(9.67)  $(8.33)
Weighted average number of units outstanding   274,294.2093    133,229.6748    23,949.7363    239,463.9322    6,484.1437 
                          
Nine Months Ended September 30, 2011                         
Increase in net asset value per unit  $1.98   $3.53   $   $4.60   $6.93 
Net income per unit†  $3.15   $3.82   $   $5.38   $8.86 
Weighted average number of units outstanding   207,190.4587    134,443.9413        208,985.0130    5,056.7416 

 

† Based on weighted average number of units outstanding during the period.

 

The accompanying notes are an integral part of these financial statements.

 

18
 

 

Seneca Global Fund, L.P.

Statements of Cash Flows

For the Nine Months Ended September 30, 2012 and 2011

(Unaudited)

 

   Nine Months Ended September 30, 
   2012   2011 
Cash flows from operating activities          
Net income (loss)  $(5,988,196)  $2,335,574 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities          
Net change in unrealized gain (loss) from futures and forwards trading   1,216,261    (758,892)
Purchases of securities and certificates of deposit   (65,973,749)   (64,333,905)
Proceeds from disposition of securities and certificates of deposit   75,146,473    21,253,675 
Net realized and change in unrealized (gain) loss in securities and certificates of deposit   (62,156)   455,796 
Changes in          
Trading Advisor management fee payable   (7,535)   (196,827)
Trading Advisor incentive fee payable       311,479 
Commissions and other trading expenses payable on open contracts   733    5,613 
Cash Manager fees payable   (5,219)   18,233 
General Partner fee payable   (7,203)   38,704 
Selling Agent fees payable – General Partner   (5,785)   14,719 
Administrative expenses payable – General Partner   (4,599)   13,634 
Offering expenses payable – General Partner   (5,068)   10,381 
Broker dealer custodial fee payable – General Partner   (1,249)   648 
Broker dealer servicing fee payable – General Partner   (364)   1,456 
Net cash provided by (used in) operating activities   4,302,344    (40,829,712)
           
Cash flows from financing activities          
Subscriptions   8,540,841    15,026,231 
Subscriptions received in advance   335,069    1,332,418 
Redemptions   (9,881,542)   (3,013,467)
Net cash provided by (used in) financing activities   (1,005,632)   13,345,182 
           
Net increase (decrease) in cash and cash equivalents   3,296,712    (27,485,530)
Cash and cash equivalents, beginning of period   18,507,703    54,051,259 
Cash and cash equivalents, end of period  $21,804,415   $26,566,729 
           
End of period cash and cash equivalents consists of          
Cash in broker trading accounts  $20,454,144   $23,810,967 
Cash and cash equivalents   1,350,271    2,755,762 
Total end of period cash and cash equivalents  $21,804,415   $26,566,729 
           
Supplemental disclosure of cash flow information          
Prior period redemptions paid  $528,168   $35,507 
Prior period subscriptions received in advance  $1,426,321   $2,536,859 
           
Supplemental schedule of non-cash financing activities          
Redemptions payable  $443,153   $415,383 

  

The accompanying notes are an integral part of these financial statements.

 

19
 

 

Seneca Global Fund, L.P.

Statements of Changes in Partners’ Capital (Net Asset Value)

For the Nine Months Ended September 30, 2012 and 2011

(Unaudited)

 

   Series A   Series B   Series C   Series I   General Partner     
   Units   Amount   Units   Amount   Units   Amount   Units   Amount   Units   Amount   Total 
Nine Months Ended September 30, 2012                                                       
Balance at December 31, 2011   269,518.2687   $23,528,145    140,857.9391   $13,684,883       $    237,052.9763   $26,673,580    6,484.1437   $776,710   $64,633,318 
Net loss        (2,417,198)        (1,131,733)        (68,485)        (2,316,751)        (54,029)   (5,988,196)
Subscriptions   51,244.5163    4,354,954    15,868.2599    1,517,077            37,108.3748    4,095,131            9,967,162 
Redemptions   (35,072.3180)   (2,940,829)   (30,469.2322)   (2,898,403)   (1,231.0827)   (121,056)   (35,032.5079)   (3,836,239)           (9,796,527)
Transfers   (30,585.5028)   (2,479,701)   487.7390    43,692    24,360.0972    2,436,009                     
Balance at September 30, 2012   255,104.9642   $20,045,371    126,744.7058   $11,215,516    23,129.0145   $2,246,468    239,128.8432   $24,615,721    6,484.1437   $722,681   $58,845,757 
                                                        
Nine Months Ended September 30, 2011                                                       
Balance at December 31, 2010   165,574.3151   $15,995,450    126,655.8355   $13,396,321       $    193,350.1543   $23,550,313    4,806.7772   $609,812   $53,551,896 
Net income        652,697         512,933                   1,125,122         44,822    2,335,574 
Subscriptions   97,448.3713    9,272,415    20,329.6304    2,125,630            50,334.0505    6,065,045    833.2146    100,000    17,563,090 
Redemptions   (11,955.1585)   (1,168,074)   (5,687.4296)   (591,173)           (13,425.3437)   (1,634,096)           (3,393,343)
Transfers   (968.3445)   (94,423)                   765.2694    94,423             
Balance at September 30, 2011   250,099.1834   $24,658,065    141,298.0363   $15,443,711       $    231,024.1305   $29,200,807    5,639.9918   $754,634   $70,057,217 

   

   Series A   Series B   Series C   Series I   General
Partner
 
September 30, 2012  $78.58   $88.49   $97.13   $102.94   $111.45 
December 31, 2011   87.30    97.15        112.52    119.79 
September 30, 2011   98.59    109.30        126.40    133.80 
December 31, 2010   96.61    105.77        121.80    126.87 

 

20
 

 

Seneca Global Fund, L.P.

Notes to Financial Statements

(Unaudited)

 

1.Organization and Summary of Significant Accounting Policies

 

Description of the Fund

 

Seneca Global Fund, L.P. (formerly Aspect Global Diversified Fund LP), (“Fund”) is a Delaware limited partnership, which was formed in 2007. The Fund operates as a commodity investment pool and commenced investment operations on September 1, 2008. The Fund issues units of limited partner interests (“Units”) in four series: Series A, Series B, Series C and Series I, which represent units of fractional undivided beneficial interest in and ownership of the Fund.

 

The Fund uses commodity trading advisors to engage in the speculative trading of futures contracts, forward currency contracts and other financial instruments traded in the United States (“U.S.”) and internationally. The Fund does not currently use options or swaps as part of its trading system, but may employ them in the future.

 

Only Series A, B and I Units are offered by the fund. Series A, B and I Units will be re-designated as Series C Units after the Fee Limit has been reached. The Series C Units are identical to the other Units except that the Series C Units only incur the Trading Advisor management fee, Trading Advisor incentive fee, brokerage expenses, General Partner management fee and administrative expenses. The Fee Limit is the total amount of selling agent commissions, broker dealer servicing fees paid to the selling agents, payments for wholesalers, payments for sales conferences, and other offering expenses that are items of compensation to Financial Industry Regulatory Authority (“FINRA”) members (but excluding among other items, the production and printing of prospectuses and related collateral material, as well as various legal and regulatory fees) paid by particular Series A, B or I Units when it is equal to 10% of the original purchase price paid by holders of those particular Units.

 

The Fund is a registrant with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the U.S. Securities Act of 1933, as amended, (“1933 Act”) and the U.S. Securities Exchange Act of 1934, as amended, (“1934 Act”). As a registrant, the Fund is subject to the regulations of the SEC and the disclosure requirements of the 1933 Act and the 1934 Act. As a commodity pool, the Fund is subject to the regulations of the U.S. Commodity Futures Trading Commission (“CFTC”), an agency of the U.S. government, which regulates most aspects of the commodity futures industry; rules of the National Futures Association (“NFA”), an industry self-regulatory organization; rules of FINRA, an industry self-regulatory organization; and the requirements of commodity exchanges where the Fund executes transactions. Additionally, the Fund is subject to the requirements of its futures broker and interbank market makers through which the Fund trades.

 

Under its Fourth Amended and Restated Limited Partnership Agreement (“Partnership Agreement”), the Fund’s business and affairs are managed and conducted by the Fund’s general partner, Steben & Company, Inc. (“General Partner”), a Maryland corporation. The General Partner is registered with the CFTC as a commodity pool operator and a commodities introducing broker, and is registered with the SEC as an investment adviser and a broker dealer. Additionally, the General Partner is a member of the NFA and FINRA. The General Partner manages all aspects of the Fund’s business and serves as one of the Fund’s selling agents.

 

Effective May 1, 2011, the Fund changed its name to Seneca Global Fund, L.P., and began using multiple trading advisors to engage in the speculative trading of futures contracts, forward currency contracts and other financial instruments. Prior to May 1, 2011, Aspect Capital Limited (“Aspect”) was the sole trading advisor for the Fund. Each trading advisor uses a proprietary, systematic trading system that deploys multiple trading strategies utilizing derivatives that seeks to identify and exploit directional moves in market behavior to a broad and diversified range of global markets including stock indices, currencies, interest rate instruments, energy products, metals and agricultural commodities.

 

Significant Accounting Policies

 

Accounting Principles

The Fund’s financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).

 

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

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Revenue Recognition

Futures, forward currency contracts, investments in securities, and certificates of deposit are recorded on a trade date basis, and gains or losses are realized when contracts/positions are liquidated. Realized gains and losses on investments in securities and certificates of deposit are determined on a specific identification basis and are included in net realized and change in unrealized gain (loss) in the consolidated statements of operations. Unrealized gains and losses on open contracts (the difference between contract trade price and fair value) are reported in the statements of financial condition as net unrealized gain or loss, as there exists a right of offset of any unrealized gains or losses. The difference between cost and the fair value of open investments in securities and certificates of deposit is reflected as unrealized gain or loss on investments in securities and certificates of deposit. Any change in net unrealized gain or loss from the preceding period is reported in the statements of operations. Interest income earned on investments in securities, certificates of deposit and other cash and cash equivalent balances is recorded on an accrual basis.

 

Fair Value of Financial Instruments

Financial instruments are recorded at fair value, the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities recorded at fair value are classified within a fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value. This fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).   The three levels of the fair value hierarchy are described below:

 

§ Level 1 – Fair value is based on unadjusted quoted prices for identical instruments in active markets. Financial instruments utilizing Level 1 inputs include futures contracts, money market funds and U.S. Treasury securities.

 

§ Level 2 – Fair value is based on quoted prices for similar instruments in active markets and inputs other than quoted prices that are observable for the financial instrument, such as interest rates and yield curves that are observable at commonly quoted intervals using a market approach. Financial instruments utilizing Level 2 inputs include forward currency contracts, certificates of deposit, commercial paper, corporate notes and U.S. and foreign government sponsored enterprise notes.

 

§ Level 3 – Fair value is based on valuation techniques in which one or more significant inputs are unobservable. The Fund has no financial instruments utilizing Level 3 inputs.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

 

The Fund assesses the classification of the instruments at each measurement date, and any transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Fund’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. For the periods ended September 30, 2012 and December 31, 2011, there were no such transfers between levels.

 

A description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis follows.

 

The investment in money market fund, included in cash and cash equivalents in the statements of financial condition, and futures contracts, all of which are exchange-traded, are valued using quoted market prices for identical assets and are classified within Level 1. The fair values of forward currency contracts are based upon third-party quoted dealer values on the interbank market and are classified within Level 2.

 

U.S. Treasury securities are recorded at fair value based on bid and ask quotes for identical instruments. Commercial paper, certificates of deposit, corporate notes and U.S. and foreign government sponsored enterprise notes are recorded at fair value based on bid and ask quotes for similar, but not identical, instruments. Accordingly, U.S. Treasury securities are classified within Level 1, and commercial paper, certificates of deposit, corporate notes and U.S. and foreign government sponsored enterprise notes are classified within Level 2.

 

Cash and Cash Equivalents

Cash and cash equivalents include investments with original maturities of three months or less at the date of acquisition that are not held for sale in the ordinary course of business. The Fund maintains deposits with financial institutions in amounts that are in excess of federally insured limits; however, the Fund does not believe it is exposed to any significant credit risk.

 

22
 

 

Brokerage Commissions and Trading Expenses

Brokerage commissions and trading expenses include brokerage and other trading fees, and are charged to expense when contracts are opened and closed.

 

Redemptions Payable

Redemptions payable represent redemptions that meet the requirements of the Fund and have been approved by the General Partner prior to period-end. These redemptions have been recorded using the period-end net asset value per Unit.

 

Income Taxes

The Fund prepares calendar year U.S. and applicable state and local tax returns. The Fund is not subject to federal income taxes as each partner is individually liable for his or her allocable share of the Fund’s income, expenses and trading gains or losses. The Fund evaluates the tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are more-likely-than-not to be sustained when examined by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense and asset or liability in the current year. Management has determined there are no material uncertain income tax positions through September 30, 2012. With few exceptions, the Fund is no longer subject to U.S. or state and local income tax examinations by tax authorities for years before 2009.

 

Foreign Currency Transactions

The Fund has certain investments denominated in foreign currencies. The purchase and sale of investments, and income and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of investments held. Such fluctuations are included with the net realized and change in unrealized gain or loss on such investments in the statement of operations.

 

Reclassification

Certain amounts in the 2011 financial statements have been reclassified to conform to the 2012 presentation without affecting previously reported partners’ capital (net asset value).

 

Recently Issued Accounting Pronouncement

In May 2011, the Financial Accounting Standards Board (“FASB”) issued new guidance to converge the fair value measurement guidance in GAAP and International Financial Reporting Standards.  This new guidance clarifies the application of existing fair value measurement requirements, changes a particular principle of fair value measurement, and requires additional fair value disclosures.  The amendments are to be applied prospectively and are effective for annual periods beginning after December 15, 2011. The Fund is currently evaluating the effect that the provisions of this guidance will have on the Fund’s financial statements.

 

In November 2011, the FASB issued new guidance that requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position.  This guidance is effective for the Fund’s annual and interim periods beginning January 1, 2013.  When effective, the Fund will provide the disclosures required by those amendments retrospectively for all comparative periods presented.  The adoption of this guidance is not expected to have a material impact on the financial position or results of operations.

 

2.Fair Value Disclosures

 

The Fund’s assets and liabilities, measured at fair value on a recurring basis, are summarized in the following tables by the type of inputs applicable to the fair value measurements:

 

23
 

 

At September 30, 2012            
   Level 1   Level 2   Total 
Equity in broker trading accounts:               
Net unrealized loss on open futures contracts*  $(82,327)  $   $(82,327)
Net unrealized gain on open forward currency contracts*        69,824    69,824 
Cash and cash equivalents:               
Money market fund   612,492        612,492 
Investments in securities:               
U.S. Treasury securities*   5,133,654        5,133,654 
U.S. government sponsored enterprise notes*       1,654,285    1,654,285 
Commercial paper*       4,888,743    4,888,743 
Corporate notes*       23,438,547    23,438,547 
Certificates of deposit*       3,007,037    3,007,037 
Total  $5,663,819   $33,058,436   $38,722,255 

 *See the condensed schedule of investments for further description.

 

At December 31, 2011            
   Level 1   Level 2   Total 
Equity in broker trading accounts:               
Net unrealized gain on open futures contracts*  $1,184,851   $   $1,184,851 
Net unrealized gain on open forward currency contracts*       18,907    18,907 
Cash and cash equivalents:               
Money market fund   1,013,019        1,013,019 
Investments in securities:               
U.S. Treasury securities*   3,429,929        3,429,929 
U.S. government sponsored enterprise notes*       4,989,359    4,989,359 
Foreign government sponsored enterprise notes*       657,305    657,305 
Commercial paper*       7,268,685    7,268,685 
Corporate notes*       27,936,271    27,936,271 
Certificates of deposit*       2,951,285    2,951,285 
Total  $5,627,799   $43,821,812   $49,449,611 

*See the condensed schedule of investments for further description.

 

There were no Level 3 holdings at September 30, 2012 and December 31, 2011 or during the periods then ended.

 

In addition to the financial instruments listed above, substantially all of the Fund’s other assets and liabilities are considered financial instruments and are reflected at fair value, or at carrying amounts that approximate fair value because of the short maturity of the instruments.

 

3.Derivative Instruments Disclosures

 

The Fund’s derivative contracts are comprised of futures and forward currency contracts, none of which were designated as hedging instruments. At September 30, 2012, the Fund’s derivative contracts had the following impact on the statements of financial condition:

 

   Derivative Assets and Liabilities, at fair value 
Statements of Financial Condition Location  Assets   Liabilities   Net 
Equity in broker trading accounts               
Net unrealized gain (loss) on open futures contracts               
Agricultural commodities  $135,411   $(184,547)  $(49,136)
Currencies   215,527    (141,750)   73,777 
Energy   230,546    (53,220)   177,326 
Equity indices   75,478    (690,651)   (615,173)
Interest rate instruments   584,782    (128,880)   455,902 
Metals   1,931,640    (2,056,663)   (125,023)
Net unrealized gain (loss) on open futures contracts  $3,173,384   $(3,255,711)  $(82,327)
                
Net unrealized gain (loss) on open forward currency contracts  $169,439   $(99,615)  $69,824 

 

24
 

 

At September 30, 2012, there were 4,401 open futures contracts and 169 open forward currency contracts. For the three and nine months ended September 30, 2012, the Fund’s derivative contracts had the following impact on the statements of operations:

 

   Three Months Ended
September 30, 2012
   Nine Months Ended
September 30, 2012
 
Types of Exposure  Net realized
gain (loss)
   Net change
in unrealized
gain (loss)
   Net realized
gain (loss)
   Net change
in unrealized
gain (loss)
 
Futures contracts                    
Agricultural commodities  $265,363   $172,369   $104,318   $179,987 
Currencies   (844,595)   1,054,743    (906,162)   (477,799)
Energy   (1,074,728)   507,330    (358,989)   (32,866)
Equity indices   (842,007)   (35,560)   (1,581,735)   (806,758)
Interest rate instruments   (620,912)   308,476    2,142,047    (186,753)
Metals   (425,491)   71,637    (1,287,026)   57,011 
Total futures contracts   (2,300,546)   2,078,995    (1,887,547)   (1,267,178)
                     
Forward currency contracts   143,817    128,723    (533,168)   50,917 
Total futures and forward currency contracts  $(2,157,359)  $2,207,718   $(2,420,715)  $(1,216,261)

 

For the three and nine months ended September 30, 2012, the number of futures contracts closed were 12,621 and 37,858, respectively, and the number of forward currency contracts closed were 1,123 and 3,113, respectively.

 

At December 31, 2011, the Fund’s derivative contracts had the following impact on the statements of financial condition:

 

   Derivative Assets and Liabilities, at fair value 
Statements of Financial Condition Location  Assets   Liabilities   Net 
Equity in broker trading accounts               
Net unrealized gain (loss) on open futures contracts               
Agricultural commodities  $224,779   $(453,902)  $(229,123)
Currencies   663,637    (112,061)   551,576 
Energy   251,099    (40,907)   210,192 
Equity indices   222,185    (30,600)   191,585 
Interest rate instruments   899,598    (256,943)   642,655 
Metals   223,462    (405,496)   (182,034)
Net unrealized gain (loss) on open futures contracts  $2,484,760   $(1,299,909)  $1,184,851 
                
Net unrealized gain (loss) on open forward currency contracts  $71,863   $(52,956)  $18,907 

 

At December 31, 2011, there were 3,745 open futures contracts and 83 open forward currency contracts. For the three and nine months ended September 30, 2011, the Fund’s derivative contracts had the following impact on the statements of operations:

 

   Three Months Ended
September 30, 2011
   Nine Months Ended
September 30, 2011
 
Types of Exposure  Net realized
gain (loss)
   Net change
in unrealized
gain (loss)
   Net realized
gain (loss)
   Net change
in unrealized
gain (loss)
 
Futures contracts                    
Agricultural commodities  $(1,379,210)  $386,516   $(1,641,371)  $(339,240)
Currencies   85,286    1,058,838    (1,209,941)   1,283,002 
Energy   (1,353,838)   628,715    555,817    261,531 
Equity indices   867,122    110,182    (996,790)   (157,208)
Interest rate instruments   6,960,913    42,039    5,421,542    456,558 
Metals   196,733    1,514,577    1,017,829    200,482 
Total futures contracts   5,377,006    3,740,867    3,147,086    1,705,125 
                     
Forward currency contracts   (539,312)   152,004    2,703,752    (946,233)
Total futures and forward currency contracts  $4,837,694   $3,892,871   $5,850,838   $758,892 

 

25
 

 

For the three and nine months ended September 30, 2011, the number of futures contracts closed was 10,978 and 28,269, respectively, and the number of forward currency contracts closed was 1,280 and 5,580, respectively.

 

4.General Partner

 

In accordance with the Partnership Agreement, the General Partner must maintain its interest in the capital of the Fund at no less than the greater of: (i) 1% of aggregate capital contributions to the Fund by all partners (including the General Partner’s contributions) or (ii) $25,000. The General Partner shares in the profits and losses of the Fund in proportion to its respective ownership interest.

 

At September 30, 2012 and December 31, 2011, the General Partner had an investment of 6,484.1437 units valued at $722,681 and $776,710, respectively.

 

The General Partner earns the following compensation:

 

§General Partner Fee – each Series of Units, other than General Partner Units, incurs a monthly fee equal to 1/12th of 1.5% of the respective Series’ month-end net asset value, payable in arrears. Prior to May 1, 2011, the General Partner fee was 1.1% per annum.

 

§Selling Agent Fees – the General Partner charges Series A Units a monthly fee equal to 1/12th of 2% of the outstanding Series A Units’ month-end net asset value, payable in arrears. The General Partner pays to the selling agents an upfront fee of 2% of the aggregate subscription amount for the sale of Series A Units. Beginning in the 13th month, the General Partner pays the selling agents a monthly fee in arrears equal to 1/12th of 2.00% of the outstanding Series A Units’ month-end net asset value. If there is no designated selling agent or the General Partner was the selling agent, such portions of the selling agent fee are retained by the General Partner.

 

§Broker Dealer Servicing Fee – the General Partner charges Series A Units a monthly fee equal to 1/12th of 0.15% of their month-end net asset value. The Series B Units which are not subject to a broker dealer custodial fee incur a monthly fee equal to 1/12th of 0.6% of their month-end net asset value. These fees are payable in arrears to the selling agents by the General Partner. If there is no designated selling agent or the General Partner was the selling agent, such portions of the broker dealer servicing fee are retained by the General Partner.

 

§Broker Dealer Custodial Fee – the General Partner charges Series B Units that are held by broker dealers who act as custodian for Series B Units for the benefit of the limited partners, a monthly fee to such broker dealers equal to 1/12th of 0.6% of the outstanding Series B Units’ month-end net asset value. These fees are payable in arrears to the selling agents by the General Partner.

 

5.Trading Advisors and Cash Managers

 

Effective May 1, 2011, the Fund uses three trading advisors. Trading advisor management fees range from 1% to 1.5% per annum of each trading advisors’ respective trading level (as defined in each respective advisory agreement) and trading advisor incentive fees equal to 20% of net new trading profits (as defined in each respective advisory agreement). Prior to May 1, 2011, the Fund used a single trading advisor, which charged the Fund a management fee of 2% per annum of the Fund’s trading level (as defined in the advisory agreement) and an incentive fee, payable quarterly, equal to 20% of net new trading profits (as defined in the advisory agreement).

 

Effective April 2011, the Fund engaged J.P. Morgan Investment Management, Inc. and Principal Global Investors, LLC (collectively, the “Cash Managers”) to provide cash management services to the Fund. The Fund incurs monthly fees, payable in arrears to the Cash Managers, equal to approximately 1/12th of 0.11% of the investments in securities and certificates of deposit.

 

26
 

 

6.Deposits with Brokers

 

To meet margin requirements, the Fund deposits funds with its brokers, subject to CFTC regulations and various exchange and broker requirements. The Fund earns interest income on its assets deposited with its brokers. At September 30, 2012 and December 31, 2011, the Fund had margin requirements of $10,302,754 and $7,516,495.

 

7.Administrative and Offering Expenses

 

The Fund reimburses the General Partner for actual monthly administrative expenses paid to various third-party service providers, including the General Partner, up to 1/12th of 0.95% of the Fund’s month-end net asset value, payable in arrears. Actual administrative expenses may vary; however, such administrative expenses will not exceed 0.95% of the Fund’s month-end net asset value per annum. The administrative expenses include legal, accounting, clerical and other back office related expenses related to the administration of the Fund and all other associated costs incurred by the Fund. For the three months ended September 30, 2012 and 2011, actual administrative expenses were $185,946 and $260,518, respectively. For the nine months ended September 30, 2012 and 2011, actual administrative expenses were $644,646 and $854,820, respectively. Such amounts are presented as administrative expenses in the statements of operations.

 

During the three months ended September 30, 2012 and 2011, the General Partner absorbed administrative expenses in excess of the 0.95% limitation of $39,261 and $102,653, respectively. During the nine months ended September 30, 2012 and 2011, the General Partner absorbed administrative expenses in excess of the 0.95% limitation of $185,516 and $417,019, respectively. Such amounts are included in administrative and offering expenses waived in the statements of operations.

 

At September 30, 2012 and December 31, 2011, $47,252 and $51,851, respectively, were payable to the General Partner for administrative expenses incurred on behalf of the Fund and not waived by the General Partner. Such amounts are presented as administrative expenses payable – General Partner in the statements of financial condition.

 

The Fund reimburses the General Partner for actual ongoing offering expenses, up to 1/12th of 0.75% of the Fund’s month-end net asset value pro rata for each Series of Units except for the General Partner and Series C Units, payable monthly in arrears. Actual ongoing offering expenses in excess of this limitation are absorbed by the General Partner. For the three months ended September 30, 2012 and 2011, actual offering expenses were $177,849 and $195,664, respectively. For the nine months ended September 30, 2012 and 2011, actual offering expenses were $457,364 and $501,023, respectively. Such amounts are presented as offering expenses in the statements of operations.

 

During the three months ended September 30, 2012 and 2011, the General Partner absorbed offering expenses in excess of the 0.75% limitation of $64,916 and $72,409, respectively. During the nine months ended September 30, 2012 and 2011, the General Partner absorbed offering expenses in excess of the 0.75% limitation of $100,658 and $159,055, respectively. Such amounts are included in administrative and offering expenses waived in the statements of operations. At September 30, 2012 and December 31, 2011, $35,381 and $40,449, respectively, were payable to the General Partner for offering expenses incurred on behalf of the Fund and not waived by the General Partner. Such amounts are presented as offering expenses payable – General Partner in the statements of financial condition.

 

8.Subscriptions, Distributions and Redemptions

 

Investments in the Fund are made by subscription agreement, subject to a minimum investment of $10,000. Subscriptions into and redemptions out of the Fund occur weekly. Each series of units will be offered to the public as of the open of business on each Wednesday at the net asset value per Unit of the relevant series at the close of the preceding business day. At September 30, 2012 and December 31, 2011, the Fund received advance subscriptions of $355,069 and $1,426,321, respectively, which were recognized as subscriptions to the Fund or returned, if applicable, subsequent to the end of the respective quarter.

 

The Fund is not required to make distributions, but may do so at the sole discretion of the General Partner. A limited partner may request and receive redemption of Series A, B, C and I Units owned at the end of any week, subject to three business days’ prior written notice to the General Partner and in certain circumstances, restrictions in the partnership agreement.

 

Series A Units redeemed prior to the first anniversary of the subscription date are subject to a redemption fee equal to the product of (i) 2% of the subscription price for such Series A Units on the subscription date, divided by twelve (ii) multiplied by the number of months remaining before the first anniversary of the subscription date. Series B, C and I Units are not subject to the redemption fee. For the three and nine months ended September 30, 2012 and 2011, these redemption fees were negligible.

 

27
 

 

The General Partner may require a limited partner to redeem from the Fund if the General Partner deems the redemption (a) necessary to prevent or correct the occurrence of a non-exempt prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code of 1986, as amended, (b) beneficial to the Fund, or (c) necessary to comply with any applicable government or self-regulatory agency regulations. Limited partners will not be required to pay any redemption fees if such limited partners are subject to a mandatory redemption of their Units within the first year of purchase.

 

9.Trading Activities and Related Risks

 

The Fund engages in the speculative trading of futures and forward currency contracts traded in the U.S. and internationally. Trading in derivatives exposes the fund to both market risk, the risk arising from a change in the fair value of a contract and credit risk, the risk of failure by another party to perform according to the terms of a contract.

 

Purchase and sale of futures contracts requires margin deposits with futures brokers. Additional deposits may be necessary for any loss of contract value. The Commodity Exchange Act (“CEAct”) requires a broker to segregate all customer transactions and assets from such broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury securities) deposited with a broker are considered commingled with all other customer funds subject to the broker’s segregation requirements. In the event of a broker’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than (or none of) the total cash and other property deposited. The Fund uses Newedge USA, LLC and J. P. Morgan Securities, LLC as its futures brokers and Newedge UK Financial Limited as its forward currency counterparty.

 

For futures contracts, risks arise from changes in the fair value of the contracts. Theoretically, the Fund is exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.

 

In addition to market risk, upon entering into commodity interest contracts there is a credit risk that the counterparty will not be able to meet its obligations to the Fund. The counterparty for futures contracts traded in the U.S. and on most non-U.S. futures exchanges is the clearinghouse associated with such exchanges. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.

 

In the case of forward currency contracts, which are traded on the interbank or other institutional market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a clearinghouse backed by a group of financial institutions; thus, there likely will be greater counterparty credit risk. While the Fund trades only with those counterparties that it believes to be creditworthy, there can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund.

 

The Fund trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty non-performance. Accordingly, the risks associated with forward currency contracts are generally greater than those associated with exchange-traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency contracts typically involves delayed cash settlement.

 

The Cash Managers manage the Fund’s cash and excess margin through investments in fixed income instruments, pursuant to investment parameters established by the General Partner. The Fund’s objective in retaining the Cash Managers is to enhance the return on its assets not required to be held by the Fund’s brokers to support the Fund’s trading. There is no guarantee that the Cash Managers will achieve returns for the Fund, net of fees payable to the Cash Managers, in excess of the returns previously achieved through the General Partner’s efforts and/or available through the Fund’s brokers, or that the Cash Managers will avoid a loss of principal on amounts placed under their management.

 

Prior to April 2011, the Fund used UBS Financial Services, Inc. as its cash management securities broker for the investment of a portion of the Fund’s excess margin amounts into fixed income instruments.

 

The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The limited partners bear the risk of loss only to the extent of the fair value of their respective investments and, in certain circumstances, distributions and redemptions received.

 

Through its investments in debt securities and certificates of deposit, the Fund has exposure to U.S. and foreign enterprises.  The following table presents the exposure at September 30, 2012.

 

28
 

 

                           % of 
       Gov't                   Partners' 
   U.S .   Sponsored                   Capital 
   Treasury   Enterprise   Commercial   Corporate   Certificates       (Net Asset 
Country or Region  Securities   Notes   Paper   Notes   of Deposit   Total   Value) 
United States  $5,133,654   $1,654,285   $3,269,509   $17,670,266   $2,555,135   $30,282,849    51.48%
Netherlands   -    -    -    1,431,823    -    1,431,823    2.43%
Canada   -    -    -    1,137,697    200,471    1,338,168    2.27%
Australia   -    -    499,906    680,434    -    1,180,340    2.01%
Japan   -    -    -    504,100    251,431    755,531    1.28%
France   -    -    -    637,127    -    637,127    1.08%
Great Britain   -    -    249,646    250,747    -    500,393    0.85%
Netherland Antilles   -    -    -    452,481    -    452,481    0.77%
Singapore   -    -    369,761    -    -    369,761    0.63%
Germany   -    -    -    250,038    -    250,038    0.42%
Luxemburg   -    -    249,996    -    -    249,996    0.42%
South America multinational   -    -    249,925    -    -    249,925    0.42%
Denmark   -    -    -    223,353    -    223,353    0.38%
Multinational   -    -    -    200,481    -    200,481    0.34%
Total  $5,133,654   $1,654,285   $4,888,743   $23,438,547   $3,007,037   $38,122,266    64.78%

  

The following table presents the exposure at December 31, 2011.

 

                           % of 
       Gov't                   Partners' 
   U.S .   Sponsored                   Capital 
   Treasury   Enterprise   Commercial   Corporate   Certificates       (Net Asset 
Country or Region  Securities   Notes   Paper   Notes   of Deposit   Total   Value) 
United States  $3,429,929   $4,989,359   $4,519,245   $19,933,426   $1,750,299   $34,622,258    53.62%
Australia   -    -    249,936    1,825,370         2,075,306    3.21%
France   -    251,279    249,959    1,176,639    249,705    1,927,582    2.98%
Great Britain   -    -    499,989    1,361,489         1,861,478    2.88%
Netherlands   -    -    -    1,713,148         1,713,148    2.65%
Canada   -    -    -    1,011,176    701,094    1,712,270    2.65%
Netherland Antilles   -    -    249,985    447,533         697,518    1.08%
Luxumberg   -    -    499,984    -    -    499,984    0.77%
Japan   -    -    499,935    -         499,935    0.77%
Sweden   -    -    -    -    250,187    250,187    0.39%
Germany   -    -    -    249,908    -    249,908    0.39%
South America multi-national   -    -    249,899    -    -    249,899    0.39%
Singapore   -    -    249,753    -    -    249,753    0.39%
Denmark   -    -    -    217,582    -    217,582    0.34%
Europe multi-national   -    204,235    -    -    -    204,235    0.32%
Africa multi-national   -    201,791    -    -    -    201,791    0.31%
Total  $3,429,929   $5,646,664   $7,268,685   $27,936,271   $2,951,285   $47,232,834    73.14%

   

10.Indemnifications

 

In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, and which provide general indemnifications. The Fund’s maximum exposure under these arrangements cannot be estimated. However, the Fund believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for such indemnifications.

 

29
 

 

11.Interim Financial Statements

 

The statements of financial condition, including the condensed schedule of investments, at September 30, 2012 and 2011, the statements of operations for the three and nine months ended September 30, 2012 and 2011, the statements of cash flows and changes in partners’ capital (net asset value) for the nine months ended September 30, 2012 and 2011, and the accompanying notes to the financial statements are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP may be omitted pursuant to such rules and regulations. In the opinion of management, such financial statements and accompanying disclosures reflect all adjustments, which were of a normal and recurring nature, necessary to present fairly the financial position at September 30, 2012 and 2011, results of operations for the three and nine months ended September 30, 2012 and 2011, cash flows and changes in partners’ capital (net asset value) for the nine months ended September 30, 2012 and 2011. The results of operations for the three and nine months ended September 30, 2012 and 2011 are not necessarily indicative of the results to be expected for the full year or any other period. These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Fund’s Form 10-K as filed with the SEC.

 

12.Financial Highlights

 

The following information presents per unit operating performance results and other supplemental financial ratios for the three and nine months ended September 30, 2012 and 2011. This information has been derived from information presented in the financial statements for limited partner units and assumes that a unit is outstanding throughout the entire period:

 

   Three Months Ended September 30, 2012   Three Months Ended September 30, 2011 
   Series A
Units
   Series B
Units
   Series C
Units†
   Series I
Units
   Series A
Units
   Series B
Units
   Series C
Units
   Series I
Units
 
Per Unit Operating Performance                                        
Net asset value per Unit at beginning of period  $79.86   $89.58   $   $104.05   $89.48   $98.76   $   $114.08 
Income (loss) from operations                                        
Gain (loss) from trading (1)   (0.04)   (0.08)   (2.63)   (0.10)   12.48    13.72        15.90 
Net investment loss (1)   (1.24)   (1.01)   (0.24)   (1.01)   (3.37)   (3.18)       (3.58)
Total income (loss) from operations   (1.28)   (1.09)   (2.87)   (1.11)   9.11    10.54        12.32 
Net asset value per Unit at end of period  $78.58   $88.49   $97.13   $102.94   $98.59   $109.30   $   $126.40 
                                         
Total return (5)   (1.60)%   (1.22)%   (2.87)%   (1.07)%   10.18%   10.67%       10.80%
                                         
Other Financial Ratios                                        
Ratios to average net asset value                                        
Expenses prior to Trading Advisor incentive fee (2)(3)(4)   7.15%   5.44%   1.96%   4.83%   7.21%   5.48%       4.89%
Trading Advisor incentive fee (5)                   1.43%   1.36%       1.42%
Total expenses   7.15%   5.44%   1.96%   4.83%   8.64%   6.84%       6.31%
Net investment loss (2)(3)(4)(6)    (6.12)%   (4.43)%   (1.46)%   (3.81)%   (8.54)%   (6.76)%       (6.21)%

 

† Series C units commenced trading on September 1, 2012. Accordingly, the performance identified above is for the one-month period ended September 30, 2012.

 

30
 

 

   Nine Months Ended September 30, 2012   Nine Months Ended September 30, 2011 
   Series A
Units
   Series B
Units
   Series C
Units†
   Series I
Units
   Series A
Units
   Series B
Units
   Series C
Units
   Series I
Units
 
Per Unit Operating Performance                                        
Net asset value per Unit at beginning of period  $87.30   $97.15   $   $112.52   $96.61   $105.77   $   $121.80 
Income (loss) from operations                                        
Gain (loss) from trading (1)    (4.89)   (5.55)   (2.63)   (6.46)   9.44    10.13        11.79 
Net investment loss (1)    (3.83)   (3.11)   (0.24)   (3.12)   (7.46)   (6.60)       (7.19)
Total income (loss) from operations   (8.72)   (8.66)   (2.87)   (9.58)   1.98    3.53        4.60 
Net asset value per Unit at end of period  $78.58   $88.49   $97.13   $102.94   $98.59   $109.30   $   $126.40 
                                         
Total return (5)   (9.99)%   (8.92)%   (2.87)%   (8.52)%   2.05%   3.34%       3.78%
                                         
Other Financial Ratios                                        
Ratios to average net asset value                                        
                                         
Expenses prior to Trading Advisor incentive fee (2)(3)(4)   7.05%   5.41%   1.96%   4.79%   7.32%   5.62%       5.03%
Trading Advisor incentive fee (5)   0.12%   0.12%       0.12%   2.060%   1.84%       1.92%
Total expenses   7.17%   5.53%   1.96%   4.91%   9.38%   7.46%       6.95%
                                         
Net investment loss (2)(3)(4)(6)    (5.89)%   (4.23)%   (1.46)%   (3.63)%   (7.68)%   (5.91)%       (5.34)%

 

† Series C units commenced trading on September 1, 2012. Accordingly, the performance identified above is for the one-month period ended September 30, 2012.

 

Total returns are calculated based on the change in value of a Series A, Series B, Series C or Series I Units during the period. An individual limited partner’s total returns and ratios may vary from the above total returns and ratios based on the timing of subscriptions and redemptions.

 

(1)The net investment loss per Unit is calculated by dividing the net investment loss by the average number of Series A, Series B, Series C or Series I Units outstanding during the period. Loss from trading is a balancing amount necessary to reconcile the change in net asset value per Unit with the other per Unit information. Such balancing amount may differ from the calculation of loss from trading per Unit due to the timing of trading gains and losses during the period relative to the number of Units outstanding.

 

(2)All of the ratios under other financial ratios are computed net of involuntary waivers of administrative and offering expenses.

 

For the three months ended September 30, 2012 and 2011, the ratios are net of 0.26% and 0.65% effect of waived administrative expenses, respectively. For the three months ended September 30, 2012 and 2011, the ratios are net of 0.44 % and 0.46% effect of waived offering expenses, respectively.

 

For the nine months ended September 30, 2012 and 2011, the ratios are net of 0.38% and 0.93% effect of waived administrative expenses, respectively. For the nine months ended September 30, 2012 and 2011, the ratios are net of 0.22% and 0.36% effect of waived offering expenses, respectively.

 

(3)The net investment loss includes interest income and excludes net realized and net change in unrealized gain (loss) from trading activities as shown on the statements of operations. The total amount is then reduced by all expenses, excluding brokerage commissions, which are included in net trading gain (loss) on the statements of operations. The resulting amount is divided by the average net asset value for the period.

 

(4)Ratios have been annualized.

 

(5)Ratios have not been annualized.

 

(6)Ratio excludes Trading Advisor incentive fees.

 

31
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The Trading Advisors

 

Effective May 1, 2011, the Fund allocates its assets among its current trading advisor, Aspect, as well as two additional trading advisors, Estlander & Partners Ltd (“EP”) and Blackwater Capital Management, LLC (“Blackwater,” and together with Aspect and EP, the “Trading Advisors”). It is anticipated that the Fund will initially delegate trading discretion over one third of the Fund’s assets to each of the Trading Advisors, however, such allocations may be altered at any time in the sole discretion of the General Partner.

 

The General Partner may cause any of the Trading Advisors to trade the Fund’s assets allocated to them at a range of approximately 0.9-1.5 times the trading level normally utilized by each Trading Advisor employing the trading program that will be traded on behalf of the Fund. The General Partner currently anticipates the trading level for each Trading Advisor to be approximately 1.2 times the trading level normally utilized by each Trading Advisor.

 

However, such trading levels are merely estimates and may be altered in respect of one or more Trading Advisors in the sole discretion of the General Partner. Thus, the Fund could experience either greater or less volatility and greater or less brokerage commission expenses relative to the Fund prior to May 1, 2011 and to clients who invest at the normal trading level of the Aspect Diversified Program depending on the amount of leverage utilized.

 

Cash Management

 

Effective April 2011, the Fund engaged J.P. Morgan Investment Management, Inc. and Principal Global Investors, LLC (collectively, the “Cash Managers”) to provide cash management services to the Fund. The Cash Managers will manage the Fund’s cash and excess margin through investments in short term, fixed income securities, pursuant to investment parameters established by the General Partner.

 

The Fund’s objective in retaining the Cash Managers to provide cash management services is to enhance the return on its assets not required to be held by the Fund’s brokers to support the Fund’s trading. There is no guarantee that the Cash Managers will achieve returns for the Fund, net of fees payable to the Cash Managers, in excess of the returns previously achieved through the General Partner’s efforts and/or available through the Fund’s brokers, or that the Cash Managers will avoid a loss of principal on amounts placed under their management.

 

Liquidity

 

At September 30, 2012, there are no known material trends, demands, commitments, events, or uncertainties at the present time that are reasonably likely to result in the Fund’s liquidity increasing or decreasing in any material way.

 

During September 2012, the Fund began offering weekly liquidity. Each series of units is offered to the public as of the open of business on each Wednesday at the net asset value per Unit of the relevant series at the close of the preceding business day. Prior to that time, investments into and redemptions out of the Fund were made monthly using the net asset value for the end of the previous month.

 

Capital Resources

 

The Fund intends to raise additional capital only through the sale of Units and does not intend to raise capital through borrowing. Due to the nature of the Fund’s business, the Fund does not have, nor does it expect to have, any capital assets. Redemptions, exchanges and sales of Units in the future will affect the amount of funds available for investment in futures contracts and other financial instruments in subsequent periods. It is not possible to estimate the amount, and therefore the impact, of future capital inflows and outflows related to the sale and redemption of Units. There are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Fund’s capital resource arrangements at the present time.

 

32
 

 

Results of Operations

 

The returns for Series A, B, and I Units for the nine months ended September 30, 2012 and 2011 were:

 

Series of Units  2012   2011 
Series A   (9.99)%   2.05%
Series B   (8.92)%   3.34%
Series I   (8.52)%   3.78%

 

The return for Series C Units for the month ended September 30, 2012 (when the first Series C Units were issued) was (2.87)%. Past performance is not necessarily indicative of future results. Further analysis of the trading gains and losses is provided below.

 

2012

 

During the nine months ended September 30, 2012, the Fund experienced a net realized loss on futures and forwards trading of $2,390,177, a change in unrealized loss on futures and forwards trading of $1,216,261 and incurred brokerage commissions of $156,726, resulting in a net loss from futures and forwards trading of $3,763,164. The Fund’s expenses during the nine months ended September 30, 2012 consisted of $442,082 in selling agent, custodial and servicing fees, and $1,102,010 in offering and administrative expenses, of which $286,174 were waived. Additionally, the Fund incurred $691,294 in Trading Advisor management fees, $73,650 in Trading Advisor incentive fees, $34,997 in Cash Manager fees and a General Partner fee of $716,348. Interest income of $487,019 and net realized and change in unrealized gain on securities and certificates of deposit of $62,156, combined with Fund expenses resulted in net loss of $5,988,196 for the nine months ended September 30, 2012.

 

During the nine months ended September 30, 2012, the Fund issued $9,967,162 of Units and redeemed $9,796,527 of Units, and when combined with the net loss, resulted in a net decrease in the Fund’s net asset value for the year from $64,663,318 to $58,845,757.

 

Discussion of monthly performance for the nine months ended September 30, 2012 follows:

 

January

In January, markets responded positively to supportive monetary policy from central banks around the world. In the U.S., the Fed announced that it expected to keep interest rates low through 2014. Meanwhile, in Europe, the European Central Bank was expected to extend its Long-Term Refinancing Operations program by providing additional loans to the region’s banks later this year, beyond the nearly half trillion euros (approximately $650 billion) already distributed to banks in December. This improved the European credit environment, helping France, Italy and Spain to hold successful bond auctions at reduced yields and allowing them to shrug off Standard & Poor’s sovereign credit downgrades earlier in the month. Positive sentiment fueled by easy monetary policy led to a rally in global equities, industrial commodities, as well as short and medium term interest rate instruments. Among currencies, it also led to a decline in the U.S. dollar, a rebound in the euro, and a surge in commodity currencies.

 

The Fund finished the month with a decline of 0.72%, 0.59% and 0.54% for Series A, B and I Units, respectively. It profited from long positions in interest rate instruments, particularly Eurodollar and Euribor contracts, as well as from long exposure to the Australian dollar. In addition, a continued decline in natural gas prices benefited the Fund’s short positions. These gains were offset by losses from short positions in metals, including aluminum and zinc. Meanwhile, short exposure to Asian equity indices, such as the Hang Seng Index, caused additional losses.

 

February

In February, markets were driven by continued monetary stimulus from central banks around the world. The European Central Bank extended an additional €529 billion (approximately $700 billion) in low interest three-year loans to 800 of the region’s banks in the second round of its Long Term Refinancing Operation to shore up the balance sheets of the financial sector in Europe. Since December, the ECB has made over €1 trillion (approximately $1.3 trillion) in loans to Europe’s banking sector. Elsewhere, the Bank of Japan and the Bank of England implemented new rounds of quantitative easing in their respective markets. These actions encouraged a greater risk appetite among investors, driving up global equity indices. Meanwhile, the U.S. saw an improvement in labor market data, prompting a rise in U.S. bond yields. In the Middle East, the threat of oil supply disruptions from rising tensions over Iran’s nuclear program led to a rally in energy prices, with Brent crude prices exceeding $125 per barrel.

 

The Fund’s largest gains came from its long positions in global equity indices and energy. However, long positions in the fixed income sector caused losses as bonds in the U.S. and Australia sold off. There was also a modest decline in currencies, as depreciation of the Japanese yen hurt the Fund’s long positions. Overall, the Fund enjoyed a gain for the month of 2.23%, 2.36% and 2.41% for Series A, B and I Units, respectively.

 

March

In March, markets continued to price in a stronger economic growth outlook for the U.S. Following improved labor and consumption data, the Fed raised its forecast from “modest” to “moderate” growth. Investors interpreted this positive language as a signal that further Fed stimulus in the form of bond purchases was not necessary. As a result U.S. long-term bonds sold off sharply. Meanwhile U.S. equities continued to rally, with the S&P 500 enjoying its best quarter since Q3 of 2009. Elsewhere, the attempt by Chinese authorities to limit domestic inflation through a gradual deceleration of economic growth had a negative impact on commodity currencies such as the Australian dollar. In energy markets, crude oil halted its 6 month rise due to softer prospective Chinese demand as well as an expected release of strategic oil reserves by the U.S., UK and France.

 

33
 

 

Although the Fund was able to profit from trends in agricultural commodities, other sectors proved more difficult to trade. Long bond positions in the U.S., Europe and Japan suffered from the mid-month spike in bond yields. Meanwhile, in Australia, central bank comments suggested an easing bias going forward which hurt the Fund’s new short bond positions in that market. In currencies, the reversal of the Australian dollar also detracted from performance. Lastly, in equities, declines in peripheral markets such as Canada and Hong Kong offset gains in the U.S. Overall the Fund finished with a loss for the month of 4.63%, 4.50% and 4.45% for Series A, B and I Units, respectively.

 

April

April saw a reversal of the positive equity market sentiment that characterized much of the first quarter of 2012, with renewed worries over global growth and the European debt crisis. Both the U.S. and China reported slowing GDP growth for Q1. Meanwhile in Europe, the UK and Spain posted a second consecutive quarter of negative growth and thus joined Italy, Ireland, Portugal and Greece in falling into a double dip recession. The possibility of a Spanish default became the latest focus for sovereign bond investors, as the effectiveness of its fiscal austerity program came into doubt, with the unemployment rate rising to 24%.

 

The Fund saw profits in April from its long positions in fixed income, as bond yields in major markets declined, with a global swing towards risk aversion. The Fund also made gains in the agricultural sector, as soybeans continued their strong year-to-date rally due to a lack of rain in South America threatening the harvest. These profits were partly offset by losses from long positions in global equities and in oil-related commodities. Overall the Fund finished with a positive return for the month of 0.54%, 0.67% and 0.73% for Series A, B and I Units, respectively.

 

May

In May, the escalating European debt crisis and weak U.S. and Chinese economic data led to a flight to safety in financial markets. In Greece, electoral gains by anti-austerity political parties stoked fears that the country might ultimately exit the Eurozone. Elsewhere, concerns grew over the health of Spain’s banks, as the already debt-laden Spanish government was forced to bail out the country’s third largest lender. Meanwhile, labor market conditions deteriorated in the U.S. and industrial production slowed in China. In response, investors sold global equities, energies and commodity currencies and sought the relative safe harbor of bonds and the U.S. dollar.

 

The Fund made its largest gains from long positions in U.S., German and UK bonds, as yields trended lower and prices moved higher. In currencies, the Fund profited from a short position in the euro which depreciated over 6% against the U.S. dollar during the month. The Fund had some offsetting losses in long equity index and oil positions, before reversing some of those exposures by month-end. Overall, the Fund finished May with a positive return for the month of 3.76%, 3.90% and 3.95% for Series A, B and I Units, respectively.

 

June

The risk appetite of global investors returned in June, as markets anticipated increased central bank intervention to spur weakening economic growth. In Europe, the risk of a splintering of the euro currency union subsided, as Greek parliamentary elections were won by political parties favoring a European bailout with austerity conditions attached, in effect keeping the country in the Eurozone. This was followed by a European summit meeting at month end where EU leaders agreed to ease conditions on loans to Spain and Italy, thereby stemming the surge in borrowing costs in those countries. In response, investors rotated from bonds into equities and sold off the U.S. dollar in favor of the euro and emerging market currencies.

 

June’s market reversals caused losses for the Fund which was positioned in “risk-off” trades due to trends over the prior two months. The largest detractor was currencies, where the fund was positioned short in both the euro and the Mexican peso. The Fund’s performance was also hurt by short exposure to equity indices and long exposure to bonds, particularly the German Bund which saw its largest monthly decline since 1994. Meanwhile, trading in the physical commodities was unprofitable, as jumps in energy and corn prices led to losses for the Fund’s short positions. Overall, the Fund finished the month with a loss for the month of 9.42%, 9.29% and 9.25% for Series A, B and I Units, respectively.

 

July

The Fund delivered strong returns in July, as more signs emerged of a faltering global economic recovery. U.S. labor market data continued to disappoint and Chinese growth weakened. Europe, however, remained the primary focus of investors. Spain’s credit conditions deteriorated, as the 10-year sovereign bond yield spiked as high as 7.75% during the month, its highest level since the inception of the euro. The European Central Bank (ECB) cut interest rates, but this did little to reverse the depreciation of the euro. The tide of negative sentiment was stanched only later in the month, when the ECB President vowed to use all necessary means to save the currency union.

 

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The largest contribution to the Fund came from the fixed income sector, where long positions profited from the ECB rate cut as well as market speculation of additional future central bank easing in Europe and the U.S. The Fund also made solid gains in currencies through its short euro exposure. Lastly, in the agricultural sector, the Fund profited from a surge in grain prices, as hot, dry weather in the U.S. damaged crop yields. Overall, the Fund finished the month with a gain for the month of 5.28%, 5.42% and 5.47% for Series A, B and I Units, respectively.

 

August

In August, investor sentiment towards the future of the Eurozone turned from pessimistic to mildly optimistic. U.S. economic reports, including non-farm payroll data, also came in better than expected. These factors extended the rally in global equities, caused a rebound in the euro and prompted an initial sell-off in safe haven U.S. and German government bonds. As the month progressed, speculation mounted that global central banks would engage in further quantitative easing, which caused bonds to recover from their earlier declines. Rising tensions between Iran and Israel caused crude oil prices to climb, while the U.S. experienced its most widespread drought since 1956, leading to higher grain prices.

 

During the month, the Fund gave back some of the profits it made in July. The Fund’s short positions in the euro and long positions in the Japanese yen suffered on market reversals. Long bond exposures were also a negative contributor in the first half of the month. The Fund did see gains in the agricultural sector due to its long soybean positions. Overall, the Fund finished the month with a loss for the month of 3.54%, 3.42% and 3.37% for Series A, B and I Units, respectively.

 

September

September saw an increase in the scale of global central bank intervention in an attempt to prevent further deterioration of economic growth. The European Central Bank announced a plan to buy unlimited amounts of government bonds of distressed countries such as Spain, in exchange for their accepting austerity reforms. Meanwhile in the U.S., the Fed announced “QE3”, a third round of quantitative easing, involving the purchase of $40B of agency-backed mortgages each month for an indefinite period of time. In response, equities rallied worldwide, as did the euro, gold and industrial metals. There was a corresponding sell-off in perceived safe haven assets such as U.S. bonds and the U.S. dollar.

 

The main impact of September’s macroeconomic policy announcements was to hurt the Fund’s long bond positions. As the equity markets rose, the Fund added to its long positions, although this did not happen quickly enough to benefit from the equity rally. In the agricultural markets, grain prices corrected after their recent run-up, hurting the Fund’s long positions, after reports that the U.S. drought had not damaged crop yields as much as expected. Overall, the Fund finished the month with a loss for the month of 3.11%, 2.98%, 2.87% and 2.93% for Series A, B, C and I Units, respectively.

 

2011

 

During the nine months ended September 30, 2011, the Fund experienced a net realized gain of $5,659,134, a change in unrealized gain of $758,892 and incurred brokerage commissions of $120,583, resulting in a net gain from futures and forwards trading of $6,297,443. The Fund’s expenses during the nine months ended September 30, 2011 were $395,278 in selling agent, custodial and servicing fees, $501,023 in offering expenses and $854,820 in administrative expenses. Offering and administrative expenses in the amount of $576,074 were waived. Additionally, the Fund incurred $839,223 in Trading Advisor management fees, $1,165,512 in Trading Advisor incentive fees, $31,369 in cash manager fees and $605,852 in General Partner management fees. Interest income of $310,930 and net realized and change in unrealized loss on securities and certificates of deposit of $455,796, combined with Fund expenses resulted in net income of $2,335,574 for the nine months ended September 30, 2011.

 

During the nine months ended September 30, 2011, the Fund issued $17,563,090 of Units and redeemed $3,393,343 of Units, and when combined with the net income, resulted in an increase in the Fund’s net asset value for the year from $53,551,896 to $70,057,217.

 

Discussion of monthly performance for the nine months ended September 30, 2011 follows:

 

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January

For the month, the Fund’s Series A, B and I Units were down 1.83%, 1.70% and 1.65%, respectively. There were two main themes that drove the markets during the month: civil unrest in North Africa and increased concerns about inflation. The Bank of China raised its reserve ratio requirement for the fourth time in two months in an effort to prevent its economy from overheating. Meanwhile, in Europe, ECB President Jean-Claude Trichet signaled a potential for interest rate increases in the Eurozone after inflation data exceeded forecasts. The Fund incurred losses from the short positions in Australian instruments as the severe flooding saw prices rally on safe haven demand. In commodities, the main losses came from silver and gold which were both affected by profit-taking after silver hit multi-decade highs and gold reached all-time highs, reinforced by some stronger economic news during the month. By contrast, the energy sector was the month’s best performer. Concerns about the Egyptian crisis drove Brent crude, gas oil and heating oil higher, to the benefit of the Fund’s long positions across the oils complex. In agriculturals, the Fund’s long positions continued to generate positive performance as prices in grains and softs moved upwards, further fueling the inflation debate.

 

February

For the month, the Fund’s Series A, B and I Units were up 2.81%, 2.95% and 3.00%, respectively. Following robust economic and earnings data, global stock markets rose at the start of the month with the S&P 500 pushing above the 1,300 level and doubling the low achieved in March 2009. However, tension in North Africa and the Middle East increased towards the end of the month, causing the oil price to soar. The Fund made gains from its long positions in oil and oil products, making energy the top sector for the month. In response to the geopolitical concerns, stock markets sold off and the Fund gave back some of its earlier profits from equity indices. Metals prices generally increased during the month. Some industrial metals rose due to supply concerns and rising global demand, while precious metals rose as safe-haven appeal returned to the market, with silver hitting a 30-year high. Gains were partly offset by losses from the fixed income sectors. Bonds rallied amid the flight to safety, to the detriment of the Fund’s short positions in the sector. Commodity-linked currencies found support as the political turmoil boosted raw materials prices. Profits were also seen from the Fund’s net short exposure to the U.S. dollar as it lost ground against several currencies including Sterling, which was supported by speculation that the Bank of England may raise interest rates earlier than the U.S. Federal Reserve.

 

March

For the month, the Fund’s Series A, B and I Units were down 1.56%, 1.43% and 1.38%, respectively. The month began positively with long positions in the energy sector making gains as the Libyan turmoil continued. However, sentiment turned bearish following European sovereign downgrades and weak Chinese trade and inflation data. On the 11th, the worst earthquake and tsunami in Japanese history devastated the country. Japanese equities sold off sharply, resulting in the Fund’s long positions in the Nikkei and Topix being the month’s worst performers. The sell-off in equities spread across the globe on worries about the implications for global growth. In response to these events, positions in the portfolio were systematically reduced. Agricultural markets also sold off to the detriment of the Fund’s long positions. Signs that the political turmoil in Ivory Coast may be easing caused the cocoa price to tumble from near 33-year highs. Strong U.S. economic data released later in the month enabled the Fund to recoup some of its earlier losses from equity indices and commodities. Expectations of an interest rate increase by the European Central Bank resulted in the Euro strengthening against the U.S. dollar, to the benefit of the Fund. These expectations also resulted in gains from the Fund’s short position in Euribor, which were partly offset by losses from long exposure to Eurodollar after the U.S. Federal Reserve announced that they would begin unwinding some stimulus measures.

 

April

For the month, the Fund’s Series A, B and I Units were up 4.96%, 5.10% and 5.15%, respectively. Returns were driven by a combination of U.S. dollar weakness and robust performance from energies and precious metals. The U.S. dollar fell against major currencies, benefiting the Fund’s net short positioning, amid continued expectations that the U.S. Federal Reserve will keep interest rates low. Long positions in oil and oil related products made gains at the start of the month as military action in Libya and the civil unrest in the wider region continued. Events on both sides of the Atlantic prompted investors to switch to safe haven assets. Standard & Poor’s cut its outlook on U.S. sovereign debt from stable to negative, driving investors to precious metals, which rallied as a result. Concerns about peripheral European debt boosted the prices of core European fixed income, resulting in losses from the Fund’s short positions in euro bund and euribor. Towards the end of the month a series of positive U.S. earnings announcements and successful European government bond auctions helped increase risk appetite. As a result the Fund made strong gains from risky assets despite a temporary mid-month energy price correction. Performance from agricultural commodities was mixed. Cotton futures fell amid uncertainty over demand, while the Fund made gains from its long position in coffee as the cost of Arabica rose to a 34-year high following increased demand from developing countries.

 

May

For the month, the Fund’s Series A, B and I Units were down 7.89%, 7.77% and 7.72%, respectively. The Fund finished lower this month with losses from energy, foreign exchange, metals, equity indices and agricultural commodities offsetting profits from interest rate instruments. An abrupt sell-off in physical commodities early in the month sent energy and precious metals prices sharply lower. The most significant losses in these sectors came from long positions in light crude, Brent crude, silver and aluminum. Reports that Greece was considering leaving the euro zone sparked a flight to safety that drove global indices lower and interest rate instruments and the U.S. dollar sharply higher. While the market moves were profitable for the Fund’s long positions in interest rate instruments, they went against the Fund’s long positions in global indices and several foreign currencies which generated losses. In agricultural commodities, losses were mostly in coffee, corn and sugar.

 

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June

For the month, the Fund’s Series A, B and I Units were down 3.59%, 3.44% and 3.37%, respectively. The Fund finished lower this month with losses in equity indices, energy, agricultural commodities, metals and currencies offsetting profits from interest rate instruments. The markets were relatively quiet during the month, although concerns over Greece’s debt and the end of the Federal Reserve’s quantitative easing program weighed heavily in the news. A modest flight to quality sent equity prices lower and interest rate instruments higher for the second month in a row. While the rise in interest rate instrument prices benefited the Fund, the fall in equity prices went against the Fund’s long positions. Over the past several weeks, the Fund’s trading advisors reduced their long equity positions, reducing the impact. In commodities, improved supply coupled with weaker confidence in the global economy sent prices lower. The decline in commodity prices was led by a drop in energy prices and agricultural commodities, both of which went against the Fund’s long positions.

 

July

For the month, the Fund’s Series A, B and I Units were up 5.11%, 5.25% and 5.30%, respectively. The Fund finished higher this month with profits in interest rate instruments, currencies and metals, offsetting losses from equity indices and agricultural commodities. The Fund’s most significant gains came from its long positions in interest rate instruments. Concerns over a weak U.S. economy and persistent debt issues in Europe helped push global bond prices higher, benefiting the Fund’s long positions. In metals, rising prices generated profits for the Fund’s long gold positions, while a weaker dollar benefited some the Fund’s long positions in major foreign currencies, including the Swiss franc, Japanese yen and Australian dollar. Equity indices continued to move sideways without a strong trend generating some losses.

 

August

For the month, the Fund’s Series A, B and I Units were up 0.20%, 0.35% and 0.39%, respectively. The Fund finished slightly higher this month with profits in interest rate instruments and equity indices offsetting losses in currencies, energy and metals. Agricultural commodities were essentially unchanged for the month. The Fund’s most significant gains came from its positions in interest rate instruments. Persistent concerns over weak European and U.S. economies coupled with lingering debt concerns in Europe, pushed global bond prices higher, generating profits for the Fund’s long positions. In currencies the largest losses came from a sharp sell-off in the Australian dollar in the first week of the month that went against the Fund’s long positions. In equity indices, prices of European stock indices were mostly lower which generated profits for the Fund’s short positions. In metals, the Fund generated significant profits from long positions in gold although those profits were offset by losses in industrial metals, especially copper.

 

September

For the month, the Fund’s Series A, B and I Units were up 4.62%, 4.78% and 4.81%, respectively. The Fund finished higher this month with profits in interest rate instruments, currencies, metals, equity indices and energy, offsetting losses in agricultural commodities. The Fund’s most significant gains came from its position in foreign currencies, including the Mexican peso, the South African rand and the euro. Both the equity and interest rate sectors were impacted by concerns about the global economy and sovereign debt issues that are playing out in Europe and the U.S. By the end of the month, stocks and interest rates were lower, which generated profits for the Fund’s long positions in interest rate instruments and its short positions in equity indices. In metals, profits from short positions in industrial metals offset losses from long positions in precious metals. In agricultural commodities, the Fund’s long positions in soybean products and corn generated losses, as the prices declined during the month.

 

Off-Balance Sheet Risk

 

The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Fund trades in futures and forward currency contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Fund, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Fund at the same time, and if the Trading Advisors were unable to offset futures interest positions of the Fund, the Fund could lose all of its assets and the limited partners would realize a 100% loss. The General Partner attempts to decrease market risk through maintenance of a margin-to-equity ratio that rarely exceeds 35%.

 

In addition to subjecting the Fund to market risk, upon entering into futures and forward currency contracts there is a risk that the counterparty will not be able to meet its obligations to the Fund. The counterparty for futures contracts traded in the U.S. and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.

 

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In the case of forward currency contracts, which are traded on the interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty risk. The General Partner utilizes only those counterparties that it believes to be creditworthy for the Fund. There can be no assurance, however, that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund. All positions of the Fund are valued each day on a mark-to-market basis.

 

The Fund invests in U.S. Treasury securities, U.S. and foreign government sponsored enterprise notes, commercial paper, corporate notes and certificates of deposit. Should an issuing entity default on its obligation to the Fund and such entity is not backed by the full faith and credit of the U.S. government, the Fund bears the risk of loss of the amount expected to be received. The Fund minimizes this risk by only investing in securities and certificates of deposit of firms with high quality debt ratings.

 

Significant Accounting Estimates

 

A summary of the Fund’s significant accounting policies are included in Note 1 to the Financial Statements.

 

The Fund’s most significant accounting policy is the valuation of its assets invested in U.S. and foreign futures and forward currency contracts, and fixed income investments. The Fund’s futures contracts are exchange-traded, with the fair value of these contracts based on exchange settlement prices. The fair values of non-exchange-traded contracts, such as forward currency contracts, are based on third-party quoted dealer values on the interbank market. The fair value of money market funds is based quoted market prices for identical shares. U.S. Treasury securities, which are stated at fair value based on quoted market prices for identical assets in an active market. Notes of U.S. and foreign government sponsored enterprises, as well as certificates of deposit commercial paper and corporate notes, are stated at fair value based on quoted market prices for similar assets in an active market. Given the valuation sources, there is little judgment or uncertainty involved in the valuation of these assets, and it is unlikely that materially different amounts would be reported under different valuation methodologies or assumptions.

 

Contractual Obligations

 

The Fund does not have any contractual obligations of the type contemplated by Item 303(a)(5) of Regulation S-K. The Fund’s sole business is trading futures and forward currency contracts, both long (contracts to buy) and short (contracts to sell).

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required.

 

Item 4: Controls and Procedures

 

The General Partner of the Fund, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Fund’s disclosure controls and procedures at September 30, 2012 (the “Evaluation Date”). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer of the General Partner concluded that, as of the Evaluation Date, the Fund’s disclosure controls and procedures were effective.

 

There has been no change in internal control over financial reporting that occurred during the period ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

Part II: Other Information

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

Not required.

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

There were no sales of unregistered securities of the Fund during the nine months ended September 30, 2012. Under the Partnership Agreement, limited partners may redeem their Units at the end of each calendar month at the then current month-end net asset value per Unit. Redemptions of Units during the third quarter of 2012 were as follows:

 

   July   August   September   Total 
A Units                    
Units redeemed   4,467.0004    3,572.9967    5,157.9562    13,197.9533 
Average net asset value per Unit  $84.08   $81.10   $78.58   $81.12 
                     
B Units                    
Units redeemed   2,703.3622    1,137.2825    2,451.8123    6,292.4570 
Average net asset value per Unit  $94.44   $91.21   $88.49   $91.54