10-Q 1 c471-20190630x10q.htm 10-Q 20190630 10-Q Q2_Taxonomy2019



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 



 

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

 

For the Quarterly Period Ended:   June 30, 2019

Or

 



 

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

 

Commission File Number: 000-50725

 

NESTOR PARTNERS

 

 



 

(Exact name of registrant as specified in its charter)

 



 

 

NEW JERSEY

 

22-2149317

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)



c/o MILLBURN RIDGEFIELD CORPORATION

55 West 46th Street, 31st Floor

New York, NY 10036

 

 



 

(Address of principal executive offices) (Zip code)

 

Registrant's telephone number, including area code:  (212) 332-7300

 

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

 

Yes            No 

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes            No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a  smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.





 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company



Emerging growth company



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

 

Yes            No 

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

 

Yes          No   



 

 


 









 

 

 

 

 

 

PART 1. FINANCIAL INFORMATION

 

 

ITEM 1. FINANCIAL STATEMENTS

 

 



 

 

 

 

 

 



 

 

 

 

 

 



 

 

 

 

 

 

Nestor Partners

 

 

 

Financial statements

 

 

 

For the three and six months ended June 30, 2019 and 2018 (unaudited)

 

 



 

 

 

 

 

 

Statements of Financial Condition (a)

 

 

Condensed Schedules of Investments (a)

 

 

Statements of Operations (b)

 

 

Statements of Changes in Partners' Capital (c)

 

 

Statements of Financial Highlights (b)

 

 

Notes to the Financial Statements

 

 

10 



 

 

 

 

 

 

(a) At June 30, 2019 (unaudited) and December 31, 2018

 

(b) For the three and six months ended June 30, 2019 and 2018 (unaudited)

 

(c) For the six months ended June 30, 2019 and 2018 (unaudited)

 



 

 

 

 

 

 



















 



 

 


 







 

 

 

 

 

Nestor Partners

Statements of Financial Condition



 

 

 

 

 



 

June 30, 2019 (unaudited)

 

 

December 31, 2018

ASSETS

 

 

 

 

 



 

 

 

 

 

EQUITY IN TRADING ACCOUNTS:

 

 

 

 

 

Investments in U.S. Treasury notes − at fair value

 

 

 

 

 

(amortized cost $17,970,207 and $20,474,790)

$

18,013,112 

 

$

20,462,519 

Net unrealized appreciation on open futures and forward

 

 

 

 

 

currency contracts

 

984,470 

 

 

3,809,427 

Due from brokers, net

 

5,672,983 

 

 

5,872,525 

Cash denominated in foreign currencies (cost $6,354,099

 

 

 

 

 

and $5,579,987)

 

6,400,820 

 

 

5,571,859 



 

 

 

 

 

Total equity in trading accounts

 

31,071,385 

 

 

35,716,330 



 

 

 

 

 

INVESTMENTS IN U.S. TREASURY NOTES − at fair value

 

 

 

 

 

(amortized cost $111,868,081 and $117,981,296)

 

112,103,936 

 

 

117,954,423 



 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

14,750,058 

 

 

14,604,941 



 

 

 

 

 

ACCRUED INTEREST RECEIVABLE

 

368,424 

 

 

278,874 



 

 

 

 

 

TOTAL

$

158,293,803 

 

$

168,554,568 



 

 

 

 

 

LIABILITIES AND PARTNERS' CAPITAL

 

 

 

 

 



 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Capital contributions received in advance

$

1,100,000 

 

$

125,000 

Net unrealized depreciation on open forward

 

 

 

 

 

currency contracts

 

1,132,651 

 

 

300,633 

Accrued brokerage fees

 

264,670 

 

 

301,842 

Due to brokers, net

 

570,219 

 

 

888,453 

Cash denominated in foreign currencies (cost $0

 

 

 

 

 

and $84,933)

 

 -

 

 

89,349 

Accrued expenses

 

141,953 

 

 

41,425 

Capital withdrawals payable to Limited Partners

 

1,464,207 

 

 

1,674,107 

Capital withdrawals payable to General Partner

 

 -

 

 

212,143 

Accrued profit share

 

226,771 

 

 

 -



 

 

 

 

 

Total liabilities

 

4,900,471 

 

 

3,632,952 



 

 

 

 

 

PARTNERS' CAPITAL

 

153,393,332 

 

 

164,921,616 



 

 

 

 

 

TOTAL

$

158,293,803 

 

$

168,554,568 



 

 

 

 

 



 

 

 

 

 

See notes to financial statements (unaudited)

 

 

 

 

 













1

 


 





 







 

 

 

 

Nestor Partners

Condensed Schedule of Investments

June 30, 2019 (UNAUDITED)



 

 

 

 

Futures and Forward Currency Contracts

Net Unrealized
Appreciation/
(Depreciation) as a % of
Partners' Capital

 

 

Net Unrealized
Appreciation/
(Depreciation)

FUTURES CONTRACTS

 

 

 

 

Long futures contracts:

 

 

 

 

Energies

0.17 

%

$

263,258 

Grains

(0.01)

 

 

(18,380)

Interest rates

0.19 

 

 

293,122 

Metals

0.04 

 

 

64,493 

Stock indices

0.17 

 

 

264,822 



 

 

 

 

Total long futures contracts

0.56 

 

 

867,315 



 

 

 

 

Short futures contracts:

 

 

 

 

Energies

0.09 

 

 

144,084 

Grains

0.09 

 

 

134,433 

Interest rates

(0.39)

 

 

(598,216)

Livestock

0.01 

 

 

15,270 

Metals

0.03 

 

 

44,264 

Softs

(0.05)

 

 

(71,290)

Stock indices

(0.09)

 

 

(137,228)



 

 

 

 

Total short futures contracts

(0.31)

 

 

(468,683)



 

 

 

 

TOTAL INVESTMENTS IN FUTURES CONTRACTS − Net

0.25 

 

 

398,632 

FORWARD CURRENCY CONTRACTS

 

 

 

 

Total long forward currency contracts

1.97 

 

 

3,016,556 

Total short forward currency contracts

(2.32)

 

 

(3,563,369)



 

 

 

 

TOTAL INVESTMENTS IN FORWARD CURRENCY

 

 

 

 

CONTRACTS − Net

(0.35)

 

 

(546,813)

 

 

 

 

 

TOTAL

(0.10)

%

$

(148,181)



 

 

 

 



 

 

 

(Continued)

















 

 

 

 

 

 

2

 


 



 

Nestor Partners

Condensed Schedule of Investments

June 30, 2019 (UNAUDITED)



 

 

 

 

 

 



U.S. TREASURY NOTES

 

 

 

 



Face
Amount

Description

Fair Value as a % of Partners' Capital

 

 

Fair Value



 

 

 

 

 

 

$

30,670,000 

   U.S. Treasury notes, 0.750%,  08/15/2019

19.96 

%

$

30,619,084 



34,570,000 

   U.S. Treasury notes, 1.000%,  11/15/2019

22.45 

 

 

34,430,910 



34,670,000 

   U.S. Treasury notes, 1.375%,  02/15/2020

22.51 

 

 

34,526,444 



30,670,000 

   U.S. Treasury notes, 1.500%, 05/15/2020

19.91 

 

 

30,540,610 



 

 

 

 

 

 



 

TOTAL INVESTMENTS IN U.S. TREASURY

 

 

 

 



 

NOTES (amortized cost $129,838,288)

84.83 

%

$

130,117,048 



 

 

 

 

 

 



See notes to financial statements (unaudited)

 

 

 

(Concluded)

































3

 


 

  





 

 

 

 

Nestor Partners

Condensed Schedule of Investments

December 31, 2018



 

 

 

 

Futures and Forward Currency Contracts

Net Unrealized
Appreciation/
(Depreciation) as a % of
Partners' Capital

 

 

Net Unrealized
Appreciation/
(Depreciation)



 

 

 

 

FUTURES CONTRACTS

 

 

 

 

Long futures contracts:

 

 

 

 

Energies

(0.04)

%

$

(59,830)

Grains

(0.01)

 

 

(18,510)

Interest rates:

 

 

 

 

30 Year U.S. Treasury Bond (26 contracts, settlement date March 2019)

0.01 

 

 

11,469 

Other

0.69 

 

 

1,134,495 



 

 

 

 

Total interest rates

0.70 

 

 

1,145,964 



 

 

 

 

Metals

(0.31)

 

 

(510,086)

Stock indices

(0.05)

 

 

(90,666)



 

 

 

 

Total long futures contracts

0.29 

 

 

466,872 



 

 

 

 

Short futures contracts:

 

 

 

 

Energies

2.03 

 

 

3,350,803 

Grains

0.15 

 

 

251,578 

Interest rates

(0.66)

 

 

(1,090,436)

Livestock

0.00 

 

 

810 

Metals

0.24 

 

 

396,897 

Softs

0.05 

 

 

76,581 

Stock indices

(0.14)

 

 

(225,371)



 

 

 

 

Total short futures contracts

1.67 

 

 

2,760,862 



 

 

 

 

TOTAL INVESTMENTS IN FUTURES CONTRACTS − Net

1.96 

 

 

3,227,734 

FORWARD CURRENCY CONTRACTS

 

 

 

 

Total long forward currency contracts

0.50 

 

 

820,193 

Total short forward currency contracts

(0.33)

 

 

(539,133)



 

 

 

 

TOTAL INVESTMENTS IN FORWARD CURRENCY

 

 

 

 

CONTRACTS − Net

0.17 

 

 

281,060 

 

 

 

 

 

TOTAL

2.13 

%

$

3,508,794 



 

 

 

 



 

 

 

(Continued)



4

 


 



 

 

 

 

 

 



 

Nestor Partners

Condensed Schedule of Investments

December 31, 2018



 

 

 

 

 

 



U.S. TREASURY NOTES

 

 

 

 



Face
Amount

Description

Fair Value as a % of Partners' Capital

 

 

Fair Value



 

 

 

 

 

 

$

33,270,000 

   U.S. Treasury notes, 0.750%,  02/15/2019

20.14 

%

$

33,201,120 



35,970,000 

   U.S. Treasury notes, 0.875%,  05/15/2019

21.68 

 

 

35,762,751 



34,170,000 

   U.S. Treasury notes, 0.750%,  08/15/2019

20.49 

 

 

33,789,592 



36,170,000 

   U.S. Treasury notes, 1.000%,  11/15/2019

21.62 

 

 

35,663,479 



 

 

 

 

 

 



 

TOTAL INVESTMENTS IN U.S. TREASURY

 

 

 

 



 

NOTES (amortized cost $138,456,086)

83.93 

%

$

138,416,942 



 

 

 

 

 

 



See notes to financial statements (unaudited)

 

 

 

(Concluded)































  

5

 


 



    







 

 

 

 

 

Nestor Partners

Statements of Operations (UNAUDITED)



 

 

 

 

 



 

 

 

 

 

 

 

For the three months ended



 

June 30, 2019

 

 

June 30, 2018

INVESTMENT INCOME:

 

 

 

 

 

Interest income

$

951,636 

 

$

602,687 



 

 

 

 

 

EXPENSES:

 

 

 

 

 

Brokerage fees

 

996,197 

 

 

955,616 

Administrative expenses

 

70,000 

 

 

70,000 

Custody fees and other expenses

 

7,302 

 

 

7,167 

Total expenses

 

1,073,499 

 

 

1,032,783 



 

 

 

 

 

NET INVESTMENT LOSS

 

(121,863)

 

 

(430,096)



 

 

 

 

 

NET REALIZED AND UNREALIZED GAINS (LOSSES):

 

 

 

 

 

Net realized gains (losses) on closed positions:

 

 

 

 

 

Futures and forward currency contracts

 

1,024,485 

 

 

3,072,046 

Foreign exchange translation

 

(65,717)

 

 

(14,038)

Net change in unrealized:

 

 

 

 

 

Futures and forward currency contracts

 

(633,051)

 

 

271,023 

Foreign exchange translation

 

108,866 

 

 

(177,636)

Net gains (losses) from U.S. Treasury notes:

 

 

 

 

 

Realized

 

3,025 

 

 

(3,868)

Net change in unrealized

 

195,324 

 

 

97,646 

Total net realized and unrealized gains

 

632,932 

 

 

3,245,173 



 

 

 

 

 

NET INCOME

 

511,069 

 

 

2,815,077 

LESS PROFIT SHARE TO GENERAL PARTNER

 

12,890 

 

 

5,227 

NET INCOME AFTER PROFIT SHARE TO 

 

 

 

 

 

GENERAL PARTNER

$

498,179 

 

$

2,809,850 



 

 

 

 

 

See notes to financial statements (unaudited)

 

 

 

 

(Continued)



 

 

 

 

 























6

 


 







 

 

 

 

 

Nestor Partners

Statements of Operations (UNAUDITED)



 

 

 

 

 



 

 

 

 

 



 

 

 

 

 



 

For the six months ended



 

June 30, 2019

 

 

June 30, 2018

INVESTMENT INCOME:

 

 

 

 

 

Interest income

$

1,860,159 

 

$

1,098,925 



 

 

 

 

 

EXPENSES:

 

 

 

 

 

Brokerage fees

 

1,995,149 

 

 

1,918,996 

Administrative expenses

 

140,000 

 

 

140,000 

Custody fees and other expenses

 

14,737 

 

 

14,528 



 

 

 

 

 

Total expenses

 

2,149,886 

 

 

2,073,524 



 

 

 

 

 

NET INVESTMENT LOSS

 

(289,727)

 

 

(974,599)



 

 

 

 

 

NET REALIZED AND UNREALIZED GAINS (LOSSES):

 

 

 

 

 

Net realized gains (losses) on closed positions:

 

 

 

 

 

Futures and forward currency contracts

 

6,614,075 

 

 

(12,572,706)

Foreign exchange translation

 

(101,787)

 

 

293,697 

Net change in unrealized:

 

 

 

 

 

Futures and forward currency contracts

 

(3,656,975)

 

 

6,777,059 

Foreign exchange translation

 

59,265 

 

 

(322,465)

Net gains (losses) from U.S. Treasury notes:

 

 

 

 

 

Realized

 

11,269 

 

 

(14,185)

Net change in unrealized

 

317,904 

 

 

85,469 



 

 

 

 

 

Total net realized and unrealized gains (losses)

 

3,243,751 

 

 

(5,753,131)



 

 

 

 

 



 

 

 

 

 

NET INCOME (LOSS)

 

2,954,024 

 

 

(6,727,730)

LESS PROFIT SHARE TO GENERAL PARTNER

 

230,607 

 

 

7,624 

NET INCOME (LOSS) AFTER PROFIT SHARE TO

 

 

 

 

 

GENERAL PARTNER

$

2,723,417 

 

$

(6,735,354)



 

 

 

 

 

See notes to financial statements (unaudited)

 

 

 

 

(Concluded)















7

 


 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nestor Partners

Statements of Changes in Partners' Capital (UNAUDITED)



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Limited Partners

 

 

Special Limited Partners

 

 

New Profit Memo Account

 

 

General Partner

 

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

PARTNERS' CAPITAL-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2019

$

96,830,015 

 

$

65,627,045 

 

$

 -

 

$

2,464,556 

 

$

164,921,616 

Contributions

 

2,617,000 

 

 

 -

 

 

3,836 

 

 

 -

 

 

2,620,836 

Withdrawals

 

(11,798,367)

 

 

(5,074,170)

 

 

 -

 

 

 -

 

 

(16,872,537)

Net income (loss)

 

1,150,972 

 

 

1,728,196 

 

 

(13)

 

 

74,869 

 

 

2,954,024 

General Partner's allocation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Profit-Accrued

 

(230,607)

 

 

 -

 

 

 -

 

 

 -

 

 

(230,607)

PARTNERS' CAPITAL-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

$

88,569,013 

 

$

62,281,071 

 

$

3,823 

 

$

2,539,425 

 

$

153,393,332 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30, 2018:

 

 

 

 

 

 

 

 

 



 

Limited Partners

 

 

Special Limited Partners

 

 

New Profit Memo Account

 

 

General Partner

 

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

PARTNERS' CAPITAL-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2018

$

99,284,720 

 

$

65,663,388 

 

$

 -

 

$

2,367,160 

 

$

167,315,268 

Contributions

 

5,932,750 

 

 

 -

 

 

 -

 

 

 -

 

 

5,932,750 

Withdrawals

 

(6,348,393)

 

 

(268,329)

 

 

 -

 

 

 -

 

 

(6,616,722)

Net loss

 

(4,618,186)

 

 

(2,040,226)

 

 

 -

 

 

(69,318)

 

 

(6,727,730)

General Partner's allocation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Profit-Accrued

 

(7,624)

 

 

 -

 

 

 -

 

 

 -

 

 

(7,624)

PARTNERS' CAPITAL-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2018

$

94,243,267 

 

$

63,354,833 

 

$

 -

 

$

2,297,842 

 

$

159,895,942 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to financial statements (unaudited)

 

 

 

 

 

 





















8

 


 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nestor Partners

Statements of Financial Highlights (UNAUDITED)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended June 30, 2019 and 2018

 

Limited
Partners

 

 

Special Limited
Partners

 



 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to average capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss) (a)

 

 

(1.50)

%

 

(2.31)

%

 

1.40

%

 

0.68

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses (a)

 

 

3.89

%

 

3.83

%

 

0.98

%

 

0.83

%

Profit share allocation (b)

 

 

0.01

%

 

0.01

%

 

0.00

%

 

0.00

%

Total expenses and profit share allocation

 

3.90

%

 

3.84

%

 

0.98

%

 

0.83

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before profit share allocation (b)

 

0.08

%

 

1.48

%

 

0.83

%

 

2.23

%

Less: profit share allocation (b)

 

 

0.01

%

 

0.01

%

 

0.00

%

 

0.00

%

Total return after profit share allocation

 

0.07

%

 

1.47

%

 

0.83

%

 

2.23

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) not annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30, 2019 and 2018

 

Limited
Partners

 

 

Special Limited
Partners

 



 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to average capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss) (a)

 

 

(1.56)

%

 

(2.43)

%

 

1.36

%

 

0.54

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses (a)

 

 

3.88

%

 

3.81

%

 

0.95

%

 

0.84

%

Profit share allocation (b)

 

 

0.24

%

 

0.01

%

 

0.00

%

 

0.00

%

Total expenses and profit share allocation

 

4.12

%

 

3.82

%

 

0.95

%

 

0.84

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before profit share allocation (b)

 

1.35

%

 

(4.53)

%

 

2.86

%

 

(3.11)

%

Less: profit share allocation (b)

 

 

0.24

%

 

0.01

%

 

0.00

%

 

0.00

%

Total return after profit share allocation

 

1.11

%

 

(4.54)

%

 

2.86

%

 

(3.11)

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) not annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to financial statements (unaudited)

 

 

 

 

 

 

 

 

 























9

 


 





NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Nestor Partners’ (the “Partnership”) financial condition at June 30, 2019 (unaudited) and December 31, 2018  (audited) and the results of its operations for the three and six months ended June 30, 2019 and 2018 (unaudited). These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Partnership's annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2018. The December 31, 2018 information has been derived from the audited financial statements as of December 31, 2018.

 

The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”), as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”), requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.

 

The Partnership enters into contracts that contain a variety of indemnification provisions. The Partnership’s maximum exposure under these arrangements is unknown. The Partnership does not anticipate recognizing any loss related to these arrangements.

 

The Income Taxes topic of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2015 to 2018, Millburn Ridgefield Corporation (the “General Partner”) has determined that no reserves for uncertain tax positions were required.



Investment Company Status: The Partnership is for U.S. GAAP purposes an investment company in accordance with FASB Codification 946 Financial Services – Investment Companies.   



There have been no material changes with respect to the Partnership's critical accounting policies, off-balance sheet arrangements or disclosure of contractual obligations as reported in the Partnership's Annual Report on Form 10-K for fiscal year 2018.

  

2. FAIR VALUE

 

The Fair Value Measurements and Disclosures topic of the Codification defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The three levels of the fair value hierarchy are described below:

 

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

 

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

 

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

 

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

 

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

 

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

  

Spot currency contracts are valued based on current market prices (“Spot Price”). Forward currency contracts are valued based on pricing models that consider the Spot Price, plus the financing cost or benefit (“Forward Point”). Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Partnership may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of months from the date the forward currency contract is being valued to its maturity date (“Months to Maturity”), then identifying the forward currency contracts for the two forward months that are closest to the Months to Maturity (“Forward Month Contracts”). Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. Model inputs can generally be verified and model

10

 


 

selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.



During the three and six months ended June 30, 2019 and 2018, there were no transfers of assets or liabilities between Level 1 and Level 2. The following tables represent the Partnership’s investments by hierarchical level as of June 30, 2019 and December 31, 2018 in valuing the Partnership’s investments at fair value. At June 30, 2019 and December 31, 2018, the Partnership held no assets or liabilities in Level 3.

  





 

 

 

 

 

 

 

 

Financial assets at fair value as of June 30, 2019



 

 

 

 

 

 

 

 



 

Level 1

 

 

Level 2

 

 

Total



 

 

 

 

 

 

 

 

U.S. Treasury Notes (1)

$

130,117,048 

 

$

 -

 

$

130,117,048 

Short-Term Money Market Fund*

 

14,500,058 

 

 

 -

 

 

14,500,058 

Exchange-Traded Futures Contracts

 

 

 

 

 

 

 

 

Energies

 

407,342 

 

 

 -

 

 

407,342 

Grains

 

116,053 

 

 

 -

 

 

116,053 

Interest rates

 

(305,094)

 

 

 -

 

 

(305,094)

Livestock

 

15,270 

 

 

 -

 

 

15,270 

Metals

 

108,757 

 

 

 -

 

 

108,757 

Softs

 

(71,290)

 

 

 -

 

 

(71,290)

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