EX-13.01 2 v338437_ex13-01.htm EXHIBIT 13.01

 

Exhibit 13.01

 

Global Macro Trust

 

(A Delaware Statutory Trust)

 

Financial Statements for the Years Ended December 31,

2012, 2011 and 2010, and Report of Independent Registered

Public Accounting Firm

 

 
 

 

GLOBAL MACRO TRUST
 
TABLE OF CONTENTS

 

  Page(s)
   
AFFIRMATION OF MILLBURN RIDGEFIELD CORPORATION  
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
   
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 and 2010:  
   
Statements of Financial Condition 2
   
Condensed Schedules of Investments 3–6
   
Statements of Operations 7
   
Statements of Changes in Trust Capital 8
   
Statements of Financial Highlights 9
   
Notes to Financial Statements 10–22

 

 
 

 

AFFIRMATION OF MILLBURN RIDGEFIELD CORPORATION

 

In compliance with the Commodity Futures Trading Commission’s regulations, I hereby affirm that to the best of my knowledge and belief, the information contained in the Statements of Financial Condition of Global Macro Trust, including the Condensed Schedules of Investments, as of December 31, 2012 and 2011, and the related Statements of Operations and Changes in Trust Capital for the three years in the period ended December 31, 2012 and the Financial Highlights for each of the periods presented, are complete and accurate.

 

Harvey Beker, Co-Chief Executive Officer  
Millburn Ridgefield Corporation  
Managing Owner of Global Macro Trust  

 

 
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Unitholders of Global Macro Trust:

 

We have audited the accompanying statements of financial condition of Global Macro Trust (the “Trust”), including the condensed schedules of investments, as of December 31, 2012 and 2011, and the related statements of operations and changes in trust capital for the three years in the period ended December 31, 2012 and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Global Macro Trust as of December 31, 2012 and 2011, and the results of its operations and changes in its trust capital for the three years in the period ended December 31, 2012 and its financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

 

 

/s/ Deloitte & Touche LLP

 

New York, New York

March 14, 2013

 

 
 

 

GLOBAL MACRO TRUST
 
STATEMENTS OF FINANCIAL CONDITION
AS OF DECEMBER 31, 2012 AND 2011

  

   2012   2011 
ASSETS          
           
EQUITY IN TRADING ACCOUNTS:          
Investments in U.S. Treasury notes — at fair value (amortized cost $99,057,395 and $81,041,000)  $99,079,846   $81,045,824 
Net unrealized appreciation on open futures and forward currency contracts   8,445,476    12,894,380 
Due from brokers   8,002,955    6,913,738 
Cash denominated in foreign currencies (cost $4,308,932 and $1,754,566)   4,327,157    1,719,017 
           
Total equity in trading accounts   119,855,434    102,572,959 
           
INVESTMENTS IN U.S. TREASURY NOTES — at fair value (amortized cost $368,743,783 and $634,052,301)   368,829,890    634,082,662 
           
CASH AND CASH EQUIVALENTS   8,138,415    42,348,737 
           
ACCRUED INTEREST RECEIVABLE   2,436,662    3,339,577 
           
TOTAL  $499,260,401   $782,343,935 
           
LIABILITIES AND TRUST CAPITAL          
           
LIABILITIES:          
Subscriptions by Unitholders received in advance  $883,797   $3,164,450 
Net unrealized depreciation on open futures and forward currency contracts   3,314,912    917,275 
Due to Managing Owner   142,003    137,996 
Accrued brokerage fees   2,427,117    4,005,466 
Accrued management fees   57,790    57,276 
Redemptions payable to Unitholders   16,282,107    17,618,625 
Redemption payable to Managing Owner   -    1,259 
Accrued expenses   171,645    180,897 
Cash denominated in foreign currencies (cost -$1,234,117 and -$2,107,152)   1,267,184    2,122,063 
Due to brokers   1,053,812    951,234 
           
Total liabilities   25,600,367    29,156,541 
           
TRUST CAPITAL:          
Managing Owner interest (8,774.775 and 8,207.970 units outstanding)   9,313,020    9,644,943 
Series 1 Unitholders (404,080.828 and 603,996.596 units outstanding)   428,867,469    709,737,394 
Series 2 Unitholders (242.952 and 190.737 units outstanding)   289,447    240,698 
Series 3 Unitholders (27,951.367 and 25,863.120 units outstanding)   33,520,653    32,771,232 
Series 4 Unitholders (1,322.742 and 606.787 units outstanding)   1,669,445    793,127 
           
Total trust capital   473,660,034    753,187,394 
           
TOTAL  $499,260,401   $782,343,935 
           
NET ASSET VALUE PER UNIT OUTSTANDING:          
Series 1 Unitholders  $1,061.34   $1,175.07 
Series 2 Unitholders  $1,191.38   $1,261.94 
Series 3 Unitholders  $1,199.25   $1,267.10 
Series 4 Unitholders  $1,262.11   $1,307.09 

 

See notes to financial statements

 

- 2 -
 

 

GLOBAL MACRO TRUST
 
CONDENSED SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 2012

 

   Net Unrealized     
   Appreciation     
   (Depreciation)   Net Unrealized 
   as a % of   Appreciation 
   Trust Capital   (Depreciation) 
FUTURES AND FORWARD CURRENCY CONTRACTS          
           
FUTURES CONTRACTS          
Long futures contracts:          
Energies   0.54%  $2,577,288 
Grains   (0.09)   (404,470)
Interest rates:          
2 Year U.S. Treasury Note (4,077 contracts, settlement date March 2013)   0.06    292,341 
5 Year U.S. Treasury Note (1,181 contracts, settlement date March 2013)   (0.01)   (47,455)
10 Year U.S. Treasury Note (545 contracts, settlement date March 2013)   (0.02)   (111,109)
30 Year U.S. Treasury Bond (105 contracts, settlement date March 2013)   (0.01)   (40,844)
Other interest rates   0.42    2,001,287 
           
Total interest rates   0.44    2,094,220 
           
Metals   0.04    182,574 
Softs   0.00    14,300 
Stock indices   0.67    3,157,189 
           
Total long futures contracts   1.60    7,621,101 
           
Short futures contracts:          
Energies   (0.64)   (3,030,038)
Grains   0.04    224,946 
Interest rates   0.01    32,326 
Livestock   (0.00)   (11,590)
Metals   (0.19)   (897,543)
Softs   0.14    647,490 
Stock indices   (0.02)   (106,850)
           
Total short futures contracts   (0.66)   (3,141,259)
           
TOTAL INVESTMENTS IN FUTURES CONTRACTS-Net   0.94    4,479,842 
           
FORWARD CURRENCY CONTRACTS          
Total long forward currency contracts   (0.20)   (949,561)
Total short forward currency contracts   0.34    1,600,283 
           
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS-Net   0.14    650,722 
           
TOTAL   1.08%  $5,130,564 

 

(Continued)

 

- 3 -
 

 

GLOBAL MACRO TRUST
 
CONDENSED SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 2012
 
U. S. TREASURY NOTES

 

       Fair Value     
Face      as a % of   Fair 
Amount   Description  Trust Capital   Value 
             
$137,850,000   U.S. Treasury notes, 0.625%, 02/28/2013   29.13%  $137,973,850 
 146,530,000   U.S. Treasury notes, 3.375%, 07/31/2013   31.51    149,271,714 
 129,840,000   U.S. Treasury notes, 0.125%, 09/30/2013   27.41    129,809,569 
 50,710,000   U.S. Treasury notes, 0.500%, 11/15/2013   10.74    50,854,603 
                
     TOTAL INVESTMENTS IN U.S. TREASURY NOTES (amortized cost $467,801,178)   98.79%  $467,909,736 

 

See notes to financial statements  (Concluded)  

 

- 4 -
 

 

GLOBAL MACRO TRUST
 
CONDENSED SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 2011

 

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

 

(Continued)

 

- 5 -
 

 

GLOBAL MACRO TRUST
 
CONDENSED SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 2011
 
U. S. TREASURY NOTES

 

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

 

See notes to financial statements  (Concluded)  

 

- 6 -
 

 

GLOBAL MACRO TRUST
 
STATEMENTS OF OPERATIONS
YEARS/PERIODS ENDED DECEMBER 31, 2012, 2011 AND 2010

 

   2012   2011   2010 
             
INVESTMENT INCOME — Interest income  $870,824   $2,072,015   $3,235,502 
                
EXPENSES:               
Brokerage and custodial fees   37,951,734    54,834,929    57,320,175 
Administrative expenses   1,968,723    2,158,133    2,233,354 
Custody fees   127,291    165,650    160,011 
Management fees   651,848    571,739    143,533 
                
Total expenses   40,699,596    57,730,451    59,857,073 
                
NET INVESTMENT LOSS   (39,828,772)   (55,658,436)   (56,621,571)
                
NET REALIZED AND UNREALIZED GAINS (LOSSES):               
Net realized gains (losses) on closed positions:               
Futures and forward currency contracts   (17,215,476)   (8,224,392)   87,904,542 
Foreign exchange translation   32,225    (52,568)   352,202 
Net change in unrealized:               
Futures and forward currency contracts   (6,846,541)   (25,425,124)   42,259,414 
Foreign exchange translation   35,618    (192,987)   (302,673)
Net gains (losses) from U.S. Treasury notes:               
Realized   (56,600)   28,504    16,976 
Net change in unrealized   73,373    (373,516)   (203,035)
                
Total net realized and unrealized gains (losses)   (23,977,401)   (34,240,083)   130,027,426 
                
NET INCOME (LOSS)   (63,806,173)   (89,898,519)   73,405,855 
                
LESS PROFIT SHARE TO MANAGING OWNER   -    1,385    262,695 
                
NET INCOME (LOSS) AFTER PROFIT SHARE TO MANAGING OWNER  $(63,806,173)  $(89,899,904)  $73,143,160 
                
NET INCOME (LOSS) AFTER PROFIT SHARE TO MANAGING OWNER PER UNIT OUTSTANDING (see Note 7):               
Series 1 Unitholders  $(113.73)  $(139.10)  $102.20 
Series 2 Unitholders  $(70.56)  $(88.62)  $72.46 
Series 3 Unitholders  $(67.85)  $(85.70)  $131.36 
Series 4 Unitholders  $(44.98)  $(58.92)  $50.68 

 

See notes to financial statements

 

- 7 -
 

 

GLOBAL MACRO TRUST
 
STATEMENTS OF CHANGES IN TRUST CAPITAL
YEARS/PERIODS ENDED DECEMBER 31, 2012, 2011 AND 2010

 

                                   New Profit Memo             
   Series 1 Unitholders   Series 2 Unitholders   Series 3 Unitholders   Series 4 Unitholders   Account   Managing Owner   Total 
   Amount   Units   Amount   Units   Amount   Units   Amount   Units   Amount   Units   Amount   Units   Amount 
                                                     
TRUST CAPITAL — January 1, 2010  $865,980,227    714,519.974   $-    -   $2,236,811    1,831.292   $-    -   $-    -   $10,937,574    9,024.593   $879,154,612 
                                                                  
Subscriptions   31,438,164    25,234.721    95,530    75.492    11,260,170    8,961.540    71,041    55.233    -    -    -    -    42,864,905 
Redemptions   (100,149,285)   (81,345.253)   -    -    (387,647)   (311.730)   -    -    -    -    (1,962,829)   (1,528.360)   (102,499,761)
Additional units allocated*   -    1,813.074    -    -    -    -    -    -    -    0.022    -    615.248    - 
Net income after profit share to                                                                 
Managing Owner   70,377,586    -    6,427    -    1,069,450    -    4,408    -    134    -    1,685,155    -    73,143,160 
Managing Owner’s profit share   -    -    -    -    -    -    -    -    262,695    199.974    -    -    262,695 
Transfer of New Profit Memo Account to Managing Owner   -    -    -    -    -    -    -    -    (262,829)   (199.996)   262,829    199.996    - 
                                                                  
TRUST CAPITAL — December 31, 2010   867,646,692    660,222.516    101,957    75.492    14,178,784    10,481.102    75,449    55.233    -    -    10,922,729    8,311.477    892,925,611 
                                                                  
Subscriptions   46,027,878    36,354.165    184,000    136.584    22,838,898    17,047.103    748,874    551.554    -    -    -    -    69,799,650 
Redemptions   (116,664,030)   (94,309.154)   (28,299)   (21.339)   (2,145,759)   (1,665.085)   -    -    -    -    (801,260)   (679.866)   (119,639,348)
Additional units allocated*   -    1,729.069    -    -    -    -    -    -    -    0.050    -    575.288    - 
Net loss after profit share to                                                                 
Managing Owner   (87,273,146)   -    (16,960)   -    (2,100,691)   -    (31,196)   -    (126)   -    (477,785)   -    (89,899,904)
Managing Owner’s profit share   -    -    -    -    -    -    -    -    1,385    1.021    -    -    1,385 
Transfer of New Profit Memo Account to Managing Owner   -    -    -    -    -    -    -    -    (1,259)   (1.071)   1,259    1.071    - 
                                                                  
TRUST CAPITAL — December 31, 2011   709,737,394    603,996.596    240,698    190.737    32,771,232    25,863.120    793,127    606.787    -    -    9,644,943    8,207.970    753,187,394 
                                                                  
Subscriptions   19,701,253    17,742.243    75,000    63.612    10,382,897    8,662.304    949,215    737.186    -    -    -    -    31,108,365 
Redemptions   (238,894,078)   (218,969.787)   (13,898)   (11.397)   (7,895,502)   (6,574.057)   (26,074)   (21.231)   -    -    -    -    (246,829,552)
Additional units allocated*   -    1,311.776    -    -    -    -    -    -    -    -    -    566.805    - 
Net loss after profit share to Managing Owner   (61,677,100)   -    (12,353)   -    (1,737,974)   -    (46,823)   -    -    -    (331,923)   -    (63,806,173)
                                                                  
TRUST CAPITAL — December 31, 2012  $428,867,469    404,080.828   $289,447    242.952   $33,520,653    27,951.367   $1,669,445    1,322.742   $-    -   $9,313,020    8,774.775   $473,660,034 

  

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

 

See notes to financial statements

 

- 8 -
 

 

GLOBAL MACRO TRUST
 
STATEMENTS OF FINANCIAL HIGHLIGHTS
YEARS/PERIODS ENDED DECEMBER 31, 2012, 2011 AND 2010

 

   2012   2011   2010 
   Series 1   Series 2   Series 3   Series 4   Series 1   Series 2   Series 3   Series 4   Series 1   Series 2*   Series 3   Series 4* 
                                                 
PER UNIT OPERATING PERFORMANCE (FOR A UNIT OUTSTANDING THROUGHOUT THE YEAR/PERIOD)                                                            
Net income (loss) from operations:                                                            
Net investment loss (a)  $(76.05)  $(33.27)  $(30.39)  $(6.59)  $(85.22)  $(32.99)  $(29.80)  $(3.46)  $(82.06)  $(23.37)  $(27.90)  $(0.38)
Net realized and unrealized gains (losses) on trading of futures and forward currency contracts   (37.70)   (37.52)   (37.60)   (38.53)   (53.38)   (54.87)   (55.16)   (54.83)   184.52    124.78    206.79    51.13 
Net gains (losses) from U.S. Treasury notes (a)   0.02    0.23    0.14    0.14    (0.50)   (0.76)   (0.68)   (0.63)   (0.26)   (0.10)   (0.41)   (0.07)
                                                             
Net income (loss) from operations   (113.73)   (70.56)   (67.85)   (44.98)   (139.10)   (88.62)   (85.64)   (58.92)   102.20    101.31    178.48    50.68 
                                                             
Less: profit share allocated to Managing Owner   0.00    0.00    0.00    0.00    0.00    0.00    0.06    0.00    0.00    28.85    47.12    0.00 
Net income (loss) after profit share allocation   (113.73)   (70.56)   (67.85)   (44.98)   (139.10)   (88.62)   (85.70)   (58.92)   102.20    72.46    131.36    50.68 
                                                             
Net asset value, beginning of year/period   1,175.07    1,261.94    1,267.10    1,307.09    1,314.17    1,350.56    1,352.80    1,366.01    1,211.97    1,278.10    1,221.44    1,315.33 
                                                             
Net asset value, end of year/period  $1,061.34   $1,191.38   $1,199.25   $1,262.11   $1,175.07   $1,261.94   $1,267.10   $1,307.09   $1,314.17   $1,350.56   $1,352.80   $1,366.01 
                                                             
RATIOS TO AVERAGE TRUST CAPITAL:                                                            
                                                             
Net investment loss   (6.96)%   (2.78)%   (2.52)%   (0.52)%   (6.78)%   (2.52)%   (2.27)%   (0.26)%   (6.66)%   (2.45)%   (2.19)%   (0.17)%
                                                             
Total expenses   7.10    2.92    2.67    0.67    7.03    2.75    2.50    0.49    7.03    2.80    2.55    0.47 
Profit share allocation   0.00    0.00    0.00    0.00    0.00    0.00    0.01    0.00    0.00    2.27    3.70    0.00 
TOTAL EXPENSES AND PROFIT SHARE ALLOCATION   7.10    2.92    2.67    0.67    7.03    2.75    2.51    0.49    7.03    5.07    6.25    0.47 
                                                             
Total return before profit share allocation   (9.68)   (5.59)   (5.35)   (3.44)   (10.58)   (6.56)   (6.33)   (4.31)   8.43    7.20    13.71    3.85 
Profit share allocation   0.00    0.00    0.00    0.00    0.00    0.00    (0.01)   0.00    0.00    (1.53)   (2.96)   0.00 
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION   (9.68)%   (5.59)%   (5.35)%   (3.44)%   (10.58)%   (6.56)%   (6.34)%   (4.31)%   8.43%   5.67%   10.75%   3.85%

 

* Series 2 units were first issued on April 1, 2010. Series 4 units were first issued on November 1, 2010. Net investment loss and total expense ratios for Series 2 and 4 for the periods ended December 31, 2010 have been annualized.

 

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

 

See notes to Financial Statements

 

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Global Macro Trust

 

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2012, 2011, and 2010

 

1.ORGANIZATION

 

Global Macro Trust (the “Trust”) was organized on July 23, 2001, under the Delaware Statutory Trust Act. At such time, original capital of $400 by Millburn Ridgefield Corporation (the “Managing Owner”) and $1,600 by the Initial Unitholder, an affiliated entity, was contributed to the Trust. The Trust commenced trading operations on July 1, 2002. The Trust engages in the speculative trading of futures and forward currency contracts. The instruments that are traded by the Trust are volatile and involve a high degree of market risk.

 

The Managing Owner manages the business of the Trust and makes all trading decisions.

 

The Managing Owner has agreed to make additional capital contributions, subject to certain possible exceptions, in order to maintain its capital account at not less than 1% of the total outstanding capital contributions in the Trust (including the Managing Owner’s contributions) but in no event shall the Managing Owner invest less than $500,000. The Managing Owner and the holders (the “Unitholders”) of the Units of Beneficial Interest (“Units”) issued by the Trust will share in any profits and losses of the Trust in proportion to the percentage interest owned by each before brokerage commissions, custodial fee, management fees and profit share allocations.

 

The Trust will dissolve on December 31, 2031 or at an earlier date if certain conditions occur set forth in the Fourth Amended and Restated Declaration of Trust and the Trust Agreement (the “Agreement”).

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation — The financial statements have been prepared in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States (the “U.S.”) as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”).

 

Investments — The Trust records its transactions in futures and forward currency contracts and U.S. Treasury notes including related income and expenses on a trade date basis.

 

Open futures contracts are valued at quoted market values. Open forward currency contracts are valued at fair value which is based on pricing models that consider the time value of money and the current market and contractual prices of the underlying financial instruments. Brokerage commissions on futures contracts are expensed when contracts are opened. Realized gains (losses) and changes in unrealized appreciation (depreciation) on futures and forward currency contracts are recognized in the periods in which the contracts are closed or the changes in the value of open contracts occur and are included in net realized and unrealized gains (losses) in the Statements of Operations.

 

Investments in U.S. Treasury notes are valued at fair value based on the midpoint of bid/ask quotations reported daily at 3 pm EST by Bloomberg. The Trust amortizes premiums and accretes discounts on U.S. Treasury notes. Such securities are normally on deposit with financial institutions (see Note 6) as collateral for performance of the Trust’s trading obligations with respect to derivative contracts or are held for safekeeping in a custody account at HSBC Bank USA, N.A.

 

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Cash and Cash Equivalents — Cash and cash equivalents includes cash and investments in Dreyfus Treasury Prime Cash Management, a short term U.S. government securities money market fund.

 

Foreign Currency Translation — Assets and liabilities denominated in foreign currencies are translated to U.S. dollars at prevailing exchange rates of such currencies. Purchases and sales of investments are translated to U.S. dollars at the exchange rate prevailing when such transactions occurred.

 

Income Taxes — The Income Taxes topic of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Trust recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Trust’s open tax years, 2009 to 2012, for the U.S. Federal jurisdiction, the New York, Connecticut and Delaware State jurisdictions and the New York City jurisdiction, there are no uncertain tax positions. The Trust is treated as a limited partnership for federal and state income tax reporting purposes and therefore the Unitholders are responsible for the payment of taxes.

 

Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.

 

Right of Offset — The customer agreements between the Trust and each of its brokers give the Trust the legal right to net unrealized gains and losses with each broker. Unrealized gains and losses related to offsetting transactions with these brokers are reflected on a net basis in the equity in trading accounts in the Statements of Financial Condition.

 

Fair Value of Financial Instruments — The fair value of the Trust’s assets and liabilities which qualify as financial instruments under the Fair Value Measurements and Disclosures topic of the Codification approximates the carrying amounts presented in the Statements of Financial Condition. The topic defines fair value, establishes a framework for measurement of fair value and expands disclosures about fair value measurements. The three levels of the fair value hierarchy are described below:

 

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2 — Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable either directly or indirectly;

 

Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

In determining fair value, the Trust separates its investments into two categories: cash instruments and derivative contracts.

 

Cash Instruments — The Trust’s cash instruments are generally classified within Level 1 of the fair value hierarchy because they are typically valued using quoted market prices. The types of instruments valued based on quoted market prices in active markets include U.S. government obligations and an investment in a quoted short-term U.S. government securities money market fund. The Managing Owner of the Trust does not adjust the quoted price for such instruments even in situations where the Trust holds a large position and a sale could reasonably impact the quoted price.

 

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

 

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OTC derivatives or forward currency contracts are valued based on pricing models that consider the current market prices (“spot prices”) plus the time value of money (“forward points”) and contractual prices of the underlying financial instruments. The forward points from the quotation service providers are generally in periods of one month, two months, three months and six months forward while the contractual forward delivery dates for the foreign forward currency contracts traded by the Trust may be in between these periods. The Managing Owner’s policy is to calculate the forward points for each contract being valued by determining the number of days from the date the forward currency contract is being valued to its maturity date and then using straight-line interpolation to calculate the valuation of forward points for the applicable forward currency contract. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.

 

During the years ended December 31, 2012 and 2011, there were no transfers of assets or liabilities between Level 1 and Level 2. The following table represents the Trust’s investments by hierarchical level as of December 31, 2012 and 2011 in valuing the Trust’s investments at fair value. At December 31, 2012 and 2011, the Trust held no assets or liabilities classified in Level 3.

 

Financial Assets at Fair Value as of December 31, 2012

 

   Level 1   Level 2   Total 
             
U.S. Treasury notes (1)  $467,909,736   $-   $467,909,736 
Short-term money market fund*   7,692,129    -    7,692,129 
Exchange-traded futures contracts               
Energies   (452,750)   -    (452,750)
Grains   (179,524)   -    (179,524)
Interest rates   2,126,546    -    2,126,546 
Livestock   (11,590)   -    (11,590)
Metals   (714,969)   -    (714,969)
Softs   661,790    -    661,790 
Stock indices   3,050,339    -    3,050,339 
                
Total exchange-traded futures contracts   4,479,842    -    4,479,842 
                
Over-the-counter forward currency contracts   -    650,722    650,722 
                
Total futures and forward currency contracts (2)   4,479,842    650,722    5,130,564 
                
Total financial assets at fair value  $480,081,707   $650,722   $480,732,429 
                
Per line item in the Statements of Financial Condition               
(1)               
Investments in U.S. Treasury notes held in brokers' trading accounts as collateral            $99,079,846 
Investments in U.S. Treasury notes held in custody             368,829,890 
Total investments in U.S. Treasury notes            $467,909,736 
                
(2)               
Net unrealized appreciation on futures and forward currency contracts            $8,445,476 
Net unrealized depreciation on futures and forward currency contracts             (3,314,912)
Total unrealized appreciation on futures and forward currency contracts            $5,130,564 

 

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

 

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Financial Assets at Fair Value as of December 31, 2011

 

   Level 1   Level 2   Total 
             
U.S. Treasury notes (1)  $715,128,486   $-   $715,128,486 
Short-term money market fund*   42,244,442    -    42,244,442 
Exchange-traded futures contracts               
Energies   1,259,549    -    1,259,549 
Grains   (1,611,884)   -    (1,611,884)
Interest rates   8,374,610    -    8,374,610 
Livestock   (24,710)   -    (24,710)
Metals   (704,941)   -    (704,941)
Softs   1,000,821    -    1,000,821 
Stock indices   (684,905)   -    (684,905)
                
Total exchange-traded futures contracts   7,608,540    -    7,608,540 
                
Over-the-counter forward currency contracts   -    4,368,565    4,368,565 
                
Total futures and forward currency contracts (2)   7,608,540    4,368,565    11,977,105 
                
Total financial assets at fair value  $764,981,468   $4,368,565   $769,350,033 
                
Per line item in the Statements of Financial Condition               
(1)               
Investments in U.S. Treasury notes held in brokers' trading accounts as collateral            $81,045,824 
Investments in U.S. Treasury notes held in custody             634,082,662 
Total investments in U.S. Treasury notes            $715,128,486 
                
(2)               
Net unrealized appreciation on futures and forward currency contracts            $12,894,380 
Net unrealized depreciation on futures and forward currency contracts             (917,275)
Total unrealized appreciation on futures and forward currency contracts            $11,977,105 

 

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

 

Recent Accounting Standards —In December 2011, FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities” which creates a new disclosure requirement about the nature of an entity’s rights of setoff and the related arrangement associated with its financial instruments and derivative instruments. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the Statements of Financial Condition and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of International Financial Reporting Standards. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Trust should also provide the disclosures retrospectively for all comparative periods presented. The Managing Owner does not expect adoption of ASU 2011-11 to materially impact the Trust’s financial statements.

 

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3.TRUST AGREEMENT

 

With the effectiveness of the Trust’s Registration Statement on August 12, 2009, the Trust began to offer Series 2, Series 3 and Series 4 units. The only units offered prior to such date were Series 1 units. Series 2, Series 3 and Series 4 units were first issued April 1, 2010, September 1, 2009 and November 1, 2010, respectively.

 

Series 1 Unitholders pay brokerage fees to the Managing Owner at the annual rate of up to 7.0% of their average month-end Net Assets Value (prior to reduction for accrued brokerage commissions or Profit Share). Series 1 Unitholders who make net capital investments into Series 1 of $100,000 or more or who had previously invested through asset-based fee or fixed fee investment programs are charged less than the annual brokerage rate of 7.0% as follows:

 

Net Capital Investments  Brokerage Fees 
     
$100,000–$499,999   6.50%
$500,000–$999,999   6.00 
Greater than $1,000,000   5.50 
Asset-based or fixed fee investment programs   4.00 

 

Brokerage fees are charged to capital accounts of the Managing Owner, its principals, their respective affiliates or the New Profit Memo Account only to the extent of charges paid to third party executing and clearing brokers. In order to maintain a uniform Net Asset Value per Unit, additional Units are issued to Series 1 Unitholders who are charged less than a 7.0% brokerage fee.

 

The Managing Owner, not the Trust, pays the allocable share to Series 1 of all routine costs of executing and clearing the Trust’s futures trades including brokerage commissions payable to the clearing brokers and electronic platform trading costs. The Managing Owner also pays, from its own funds, selling commissions on all sales of Series 1 Units.

 

The Trust pays the Managing Owner a management fee of 2% per year of the Trust’s Net Asset Value (before management fee and profit share calculations) attributable to Series 2 and 3 Units. In addition, Series 2 Unitholders pay an annual custodial fee of 0.25% of their attributable Net Asset Value before management fee and profit share calculations. Series 2, 3 and 4 Units are also charged for their pro rata share of the Trust’s actual trade execution and clearing costs including electronic platform trading costs. Series 4 Unitholders are not charged a management fee.

 

For the years ended December 31, 2012, 2011 and 2010, brokerage and custodial fees were as follows:

 

   2012   2011   2010 
             
Brokerage fees  $37,951,047   $54,834,417   $57,320,020 
Custodial fees   687    512    155 
                
Total  $37,951,734   $54,834,929   $57,320,175 

 

During the year ended December 31, 2012, amounts paid to selling agents on Series 1 units sold subsequent to August 12, 2009 exceeded 9.5% of the gross offering proceeds of the Series 1 Units sold. As a result, amounts that otherwise would be paid to selling agents for that Series 1 Unit were instead rebated to the Trust for the benefit of all holders of Series 1 Units. The total amount rebated to the Trust during the year ended December 31, 2012, $36,144, is included in “Brokerage and custodial fees” in the Statements of Operations. No amount was rebated to the Trust during the years ended December 31, 2011 and 2010.

 

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The Agreement provides that the Managing Owner’s profit share, equal to 20% of New Trading Profits in excess of the highest cumulative level of Trading Profit as of any previous calendar year-end, is charged to the Unitholders’ capital accounts. The highest cumulative level of Trading Profit is maintained separately for Series 1 and Series 2 and 3 Unitholders in the aggregate. Series 4 Unitholders are not charged profit share. New Trading Profits include realized and unrealized trading profits (losses), brokerage fees, trading-related expenses and administrative expenses. New Trading Profits do not include interest income. For Unitholders’ redemptions during the year, the profit share calculation shall be computed as though the redemption occurred at year-end. Profit share attributable to interests redeemed during a year is tentatively credited to an account maintained for bookkeeping purposes called New Profit Memo Account. Any profit share charged is added to the Managing Owner’s capital account to the extent that net taxable capital gains are allocated to the Managing Owner. The remainder of such profit share, if any, is added to the New Profit Memo Account. The Managing Owner may not make any withdrawal from the balance in the New Profit Memo Account. If, at the end of a subsequent year, net taxable gains are allocated to the Managing Owner in excess of such year’s profit share, a corresponding amount is transferred from the New Profit Memo Account to the Managing Owner’s capital account.

 

The Trust will pay its legal, accounting, auditing, printing, postage and similar administrative expenses (including Trustees’ fees, accounting services fees and the expenses of updating the Prospectus) as well as extraordinary costs. The Managing Owner, at its discretion, may reimburse certain expenses paid by the Trust.

 

Units may be redeemed at the option of any Unitholder at Net Asset Value (as defined in the Agreement) as of the close of business on the last business day of any calendar month on ten business days written notice to the Managing Owner. Series 1 Unitholders who redeem Units at or prior to the end of the first consecutive six-month and five-month periods after such Units are sold shall be assessed redemption charges calculated based on their redeemed Units’ Net Asset Value as of the date of redemption as follows:

 

   Redemption Charges 
Subscriptions  First 6 Months   Second 5 Months 
         
Less than $100,000   4.0%   3.0%
$100,000–$499,999   3.5    2.5 
$500,000–$999,999   3.0    2.0 
Greater than $1,000,000   2.5    1.5 

 

All redemption charges will be paid to the Managing Owner. At December 31, 2012 and 2011, $11,982 and $801, respectively, of redemption charges were owed to the Managing Owner and are included in “Due to Managing Owner” in the Statements of Financial Condition. The aggregate amount of redemption charges paid to the Managing Owner for the years ended December 31, 2012, 2011 and 2010, were $117,082, $18,650 and $17,207, respectively.

 

4.DUE FROM/TO BROKERS

 

At December 31, 2012 and 2011, due from and due to brokers balances in the Statements of Financial Condition include net cash receivable from each broker and net cash payable to each broker, respectively.

 

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5.TRADING ACTIVITIES

 

The Trust conducts its futures trading with various futures commission merchants (“FCMs”) on futures exchanges and its forward currency trading with various banks or dealers (“Dealers”) in the interbank markets. Substantially all assets included in the Trust’s equity in trading accounts and certain liability accounts, as discussed below, were held as collateral by such FCMs in either U.S. regulated segregated accounts (for futures contracts traded on U.S. exchanges) or non-U.S. secured accounts (for futures contracts traded on non-U.S. exchanges) as required by U.S. Commodity Futures Trading Commission’s regulations or held as collateral by the Dealers.

 

Liabilities in the Statements of Financial Condition that are components of “Total equity in trading accounts” include net unrealized depreciation on open futures and forward currency contracts, cash denominated in foreign currencies and due to brokers.

 

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

 

6.DERIVATIVE INSTRUMENTS

 

The Trust is party to derivative financial instruments in the normal course of its business. These financial instruments include futures and forward currency contracts which may be traded on an exchange or OTC.

 

The Trust records its derivative activities on a mark-to-market basis as described in Note 2. For OTC contracts, the Trust enters into master netting agreements with its counterparties. Therefore, assets represent the Trust’s unrealized gains less unrealized losses for OTC contracts in which the Trust has a master netting agreement. Similarly, liabilities represent net amounts owed to counterparties on OTC contracts.

 

Futures contracts are agreements to buy or sell an underlying asset or index for a set price in the future. Initial margin deposits are made upon entering into futures contracts and can be either in cash or treasury securities. Open futures contracts are revalued on a daily basis to reflect the market value of the contracts at the end of each trading day. Variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. When a contract is closed, the Trust records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. The Trust bears the market risk that arises from changes in the value of these financial instruments.

 

Forward currency contracts entered into by the Trust represent a firm commitment to buy or sell an underlying currency at a specified value and point in time based upon an agreed or contracted quantity. The ultimate gain or loss is equal to the difference between the value of the contract at the onset and the value of the contract at settlement date.

 

Each of these financial instruments is subject to various risks similar to those related to the underlying financial instruments including market risk, credit risk and sovereign risk.

 

Market risk is the potential change in the value of the instruments traded by the Trust due to market changes including interest and foreign exchange rate movements and fluctuations in futures or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The financial instruments traded by the Trust contain varying degrees of off-balance sheet risk whereby changes in the market values of the futures and forward currency contracts and the Trust’s satisfaction of its obligations related to such market value changes may exceed the amount recognized in the Statements of Financial Condition.

 

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Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. Credit risk is normally reduced to the extent that an exchange or clearing organization acts as a counterparty to futures transactions since typically the collective credit of the members of the exchange is pledged to support the financial integrity of the exchange. In the case of OTC transactions, the Trust must rely solely on the credit of the individual counterparties. The contract amounts of the forward and futures contracts do not represent the Trust’s risk of loss due to counterparty nonperformance. The Trust’s exposure to credit risk associated with counterparty nonperformance of these contracts includes unrealized gains inherent in such contracts, which are recognized in the Statements of Financial Condition, plus the value of margin or collateral held by the counterparty. The amount of such credit risk was $54,632,696 and $32,236,730 at December 31, 2012 and 2011, respectively.

 

The Managing Owner has established procedures to actively monitor market risk and minimize credit risk although there can be no assurance that it will in fact succeed in doing so. The Managing Owner’s market risk control procedures include diversification of the Trust’s portfolio and continuously monitoring the portfolio’s open positions, historical volatility and maximum historical loss. The Managing Owner seeks to minimize credit risk primarily by depositing and maintaining the Trust’s assets at financial institutions and brokers which the Managing Owner believes to be creditworthy. The Trust’s trading activities are primarily with brokers and other financial institutions located in North America, Europe and Asia. All futures transactions of the Trust are cleared by major securities firms, pursuant to customer agreements, including Barclays Capital Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. (a wholly owned subsidiary of Deutsche Bank AG), J.P. Morgan Securities LLC., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Newedge USA, LLC (a wholly owned subsidiary of Newedge Group which is owned by Société Générale (50%) and Calyon (50%)). The Trust ceased clearing trades through Newedge USA, LLC during September 2012. For all forward currency transactions, the Trust utilizes three prime brokers, Barclays Bank PLC, Deutsche Bank AG and Morgan Stanley & Co., LLC.

 

The Trust is subject to sovereign risk such as the risk of restrictions being imposed by foreign governments on the repatriation of cash and the effect of political or economic uncertainties. Net unrealized appreciation (depreciation) on futures and forward currency contracts are denominated in the functional currency (U.S. dollar). Cash settlement of futures and forward currency contracts is made in the local currency (settlement currency) and then translated to U.S. dollars.

 

- 17 -
 

 

Net unrealized appreciation (depreciation) on futures and forward currency contracts by settlement currency type, denominated in U.S. dollars, is detailed below:

 

   December 31, 
   2012   2011 
   Total Net       Total Net     
   Unrealized       Unrealized     
   Appreciation   Percent   Appreciation   Percent 
Currency Type  (Depreciation)   of Total   (Depreciation)   of Total 
                 
Australian dollar  $(1,068,159)   (20.82)%  $1,181,145    9.86%
British pound   (281,809)   (5.49)   268,046    2.24 
Canadian dollar   (27,452)   (0.54)   793,734    6.63 
Czech koruna   150,986    2.94    148,481    1.24 
Euro   3,057,320    59.59    3,382,866    28.24 
Hong Kong dollar   246,176    4.80    (29,417)   (0.25)
Hungarian forint   (1,002,638)   (19.54)   115,728    0.97 
Japanese yen   1,874,035    36.53    2,674,868    22.33 
Korean won   12,927    0.25    (187,989)   (1.57)
Mexican peso   6,688    0.13    (537)   (0.00)
New Zealand dollar   -    -    551,053    4.60 
Norwegian krone   (19,932)   (0.39)   (878,248)   (7.33)
Polish zloty   357,590    6.97    (29,114)   (0.24)
Romanian leu   32,777    0.64    28,100    0.23 
Singapore dollar   20,514    0.40    84,101    0.70 
South African rand   (18,651)   (0.36)   (9,218)   (0.08)
Swedish krona   (208,663)   (4.07)   (328,241)   (2.74)
Swiss franc   (17,268)   (0.34)   607,933    5.08 
Taiwan dollar   28,683    0.56    (148,333)   (1.24)
Thai baht   49,652    0.97    6,878    0.06 
Turkish lira   (67,516)   (1.32)   (55,283)   (0.46)
U .S. dollar   2,005,304    39.09    3,800,552    31.73 
                     
Total  $5,130,564    100.00%  $11,977,105    100.00%

 

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

 

The Trust’s market risk is influenced by a wide variety of factors including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Trust’s open positions and the liquidity of the markets in which it trades.

 

The Trust engages in the speculative trading of futures and forward contracts on agricultural commodities, currencies, energies, interest rates, metals and stock indices. The following were the primary trading risk exposures of the Trust at December 31, 2012 and 2011 by market sector:

 

Agricultural (grains, livestock and softs) – The Trust’s primary exposure is to agricultural price movements, which are often directly affected by severe or unexpected weather conditions as well as supply and demand factors.

 

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Currencies – Exchange rate risk is a principal market exposure of the Trust. The Trust’s currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. The fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Trust trades in a large number of currencies including cross-rates—e.g., positions between two currencies other than the U.S. dollar.

 

Energies – The Trust’s primary energy market exposure is to gas and oil price movements often resulting from political developments in the Middle East and economic conditions worldwide. Energy prices are volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.

 

Interest Rates – Interest rate movements directly affect the price of the sovereign bond futures positions held by the Trust and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries may materially impact the Trust’s profitability. The Trust’s primary interest rate exposure is to interest rate fluctuations in countries or regions including Australia, Canada, Japan, Switzerland, the United Kingdom, the U.S. and the Eurozone. However, the Trust also may take positions in futures contracts on the government debt of other nations. The Managing Owner anticipates that interest rates in these industrialized countries or areas, both long-term and short-term, will remain the primary interest rate market exposure of the Trust for the foreseeable future.

 

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

 

Stock Indices – The Trust’s equity exposure through stock index futures is to equity price risk in the major industrialized countries as well as other countries.

 

The Derivatives and Hedging topic of the Codification requires entities to recognize in the Statements of Financial Condition all derivative contracts as assets or liabilities. Fair value of futures and forward currency contracts in a net asset position are recorded in the Statements of Financial Condition as “Net unrealized appreciation on open futures and forward currency contracts.” Fair value of futures and forward currency contracts in a liability position are recorded in the Statements of Financial Condition as “Net unrealized depreciation on open futures and forward currency contracts.” The Trust’s policy regarding fair value measurement is discussed in Note 2.

 

Since the derivatives held or sold by the Trust are for speculative trading purposes, derivative instruments are not designated as hedging instruments under the provisions of the Derivatives and Hedging guidance. Accordingly, all realized gains and losses as well as any change in net unrealized gains or losses on open positions from the preceding period are recognized as part of the Trust’s trading gains and losses in the Statements of Operations.

 

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The following tables present the fair value of open futures and forward currency contracts, held long or sold short, at December 31, 2012 and 2011. Fair value is presented on a gross basis even though the contracts are subject to master netting agreements and qualify for net presentation in the Statements of Financial Condition.

 

Fair Value of Futures and Forward Currency Contracts at December 31, 2012

 

                   Net Unrealized 
   Fair Value - Long Positions   Fair Value - Short Positions   Gain (Loss) on 
Sector  Gains   Losses   Gains   Losses   Open Positions 
                     
Futures contracts:                         
Energies  $2,595,897   $(18,609)  $176,518   $(3,206,556)  $(452,750)
Grains   -    (404,470)   245,396    (20,450)   (179,524)
Interest rates   3,807,256    (1,713,036)   32,326    -    2,126,546 
Livestock   -    -    -    (11,590)   (11,590)
Metals   294,790    (112,216)   3,470    (901,013)   (714,969)
Softs   14,300    -    820,793    (173,303)   661,790 
Stock indices   3,561,052    (403,863)   -    (106,850)   3,050,339 
                          
Total futures contracts   10,273,295    (2,652,194)   1,278,503    (4,419,762)   4,479,842 
                          
Forward currency contracts   5,057,295    (6,006,856)   6,000,398    (4,400,115)   650,722 
                          
Total futures and forward currency contracts  $15,330,590   $(8,659,050)  $7,278,901   $(8,819,877)  $5,130,564 

 

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

 

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

 

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The effect of trading futures and forward currency contracts is represented on the Statements of Operations for the years ended December 31, 2012, 2011 and 2010 as “Net realized gains (losses) on closed positions: Futures and forward currency contracts” and “Net change in unrealized: Futures and forward currency contracts.” These trading gains and losses are detailed below:

 

Sector  2012   2011   2010 
             
Futures contracts:               
Energies  $(9,616,856)  $7,688,026   $(6,296,617)
Grains   (7,690,728)   (10,817,032)   14,680,492 
Interest rates   24,444,275    74,456,429    78,525,936 
Livestock   (1,158,380)   (2,910,290)   (531,000)
Metals   (12,773,525)   (974,007)   12,922,817 
Softs   3,389,662    (1,791,425)   7,618,692 
Stock indices   (3,683,359)   (66,244,167)   (2,020,460)
                
Total futures contracts   (7,088,911)   (592,466)   104,899,860 
                
Forward currency contracts   (16,973,106)   (33,057,050)   25,264,096 
                
Total futures and forward currency contracts  $(24,062,017)  $(33,649,516)  $130,163,956 

 

The following table presents average notional value by sector in U.S. dollars of open futures and forward currency contracts for the years ended December 31, 2012, 2011 and 2010. The Trust’s average Net Asset Value during 2012, 2011 and 2010 was approximately and $603,000,000, $851,000,000 and $866,000,000, respectively.

 

   2012   2011   2010 
Sector  Long Positions   Short Positions   Long Positions   Short Positions   Long Positions   Short Positions 
                         
Futures contracts:                              
Energies  $74,820,385   $88,376,901   $127,381,359   $48,647,953   $183,992,274   $116,768,010 
Grains   26,413,270    21,155,358    53,980,643    40,497,833    57,678,838    40,281,856 
Interest rates   1,392,478,396    13,707,348    1,079,809,596    61,557,330    1,274,911,920    47,891,170 
Livestock   -    6,183,656    5,927,944    7,597,444    16,433,746    5,323,786 
Metals   24,635,116    47,230,107    81,393,624    40,499,934    115,309,169    11,071,090 
Softs   3,769,785    27,166,883    17,865,981    10,367,157    29,206,211    7,135,608 
Stock indices   195,268,153    67,827,053    244,479,325    70,839,469    478,292,206    14,482,348 
                               
Total futures contracts   1,717,385,105    271,647,306    1,610,838,472    280,007,120    2,155,824,364    242,953,868 
                               
Forward currency contracts   431,007,736    367,222,250    714,484,864    292,797,211    876,153,841    358,871,897 
                               
Total average notional  $2,148,392,841   $638,869,556   $2,325,323,336   $572,804,331   $3,031,978,205   $601,825,765 

 

Notional values in the interest rate sector were calculated by converting the notional value in local currency of all open interest rate futures positions to 10-year equivalent fixed income instruments, translated to U.S. dollars at each quarter-end during 2012, 2011 and 2010. The 10-year note is often used as a benchmark for many types of fixed-income instruments and the Managing Owner believes it is a more meaningful representation of notional values of the Trust’s open interest rate positions.

 

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7.FINANCIAL HIGHLIGHTS

 

Per Unit operating performance for Series 1, 2, 3 and 4 Units is calculated based on Unitholders’ trust capital for each Series taken as a whole utilizing the beginning and ending Net Asset Value per unit and weighted average number of units during the period/year. Weighted average number of units for each Series is detailed below:

 

   Years ended December 31,     
   2012   2011   2010   Date of first issuance 
                 
Series 1   512,141.713(1)   645,173.947(1)   687,898.790(1)  July 23, 2001 
Series 2   228.982(1)   156.318(1)   64.584(2)  April 1, 2010 
Series 3   26,798.935(1)   21,549.160(1)   5,536.921(1)  September 1, 2009 
Series 4   1,241.673(1)   532.525(1)   34.462(3)  November 1, 2010 
                     

(1) January 1 - December 31

(2) April 1 - December 31

(3) November 1 - December 31

 

Returns and ratios are calculated for each Series taken as a whole. An individual Unitholder’s per unit operating performance may vary based on the timing of capital transactions and differences in individual Unitholder’s brokerage fee (for Series 1) custodial fee (for Series 2), management fee (for Series 2 and 3) and profit share allocation arrangements. Net investment loss and total expense ratios have been annualized for reporting periods consisting of less than twelve months.

 

8.REDEMPTION PAYABLE TO MANAGING OWNER

 

At December 31, 2011, a redemption payable of $1,259 was related to profit share allocated to the Managing Owner at year-end and redeemed. There was no redemption payable to the Managing Owner at December 31, 2012.

 

* * * * * *

 

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