Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2012
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number000-24111
WESTPORT JWH FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
New York | 13-3939393 | |
| ||
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
c/o Ceres Managed Futures LLC
522 Fifth Ave — 14th Floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
(855) 672-4468
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No _
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes X No _
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “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 X | Smaller reporting company _ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes _ No X
As of October 31, 2012, 29,725.5487 Limited Partnership Redeemable Units were outstanding.
Table of Contents
WESTPORT JWH FUTURES FUND L.P.
FORM 10-Q
2
Table of Contents
Westport JWH Futures Fund L.P.
Statements of Financial Condition
(Unaudited) | ||||||||
September 30, | December 31, | |||||||
2012 | 2011 | |||||||
Assets: | ||||||||
Investment in JWH Master, at fair value | $ | 34,377,751 | $ | 49,319,514 | ||||
Equity in trading account: | ||||||||
Cash | 5,119,252 | 6,385,471 | ||||||
Cash margin | 565,580 | 1,021,675 | ||||||
Net unrealized appreciation on open futures contracts | 109,520 | 176,403 | ||||||
Net unrealized appreciation on open forward contracts | — | 28,388 | ||||||
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Total trading equity | 40,172,103 | 56,931,451 | ||||||
Interest receivable | 240 | — | ||||||
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Total assets | $ | 40,172,343 | $ | 56,931,451 | ||||
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Liabilities and Partners’ Capital | ||||||||
Liabilities: | ||||||||
Net unrealized depreciation on open forward contracts | $ | 49,313 | $ | — | ||||
Accrued expenses: | ||||||||
Brokerage fees | 175,538 | 249,075 | ||||||
Management fees | 66,294 | 94,205 | ||||||
Other | 171,211 | 159,142 | ||||||
Redemptions payable | 2,592,565 | 847,822 | ||||||
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Total liabilities | 3,054,921 | 1,350,244 | ||||||
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Partners’ Capital: | ||||||||
General Partner, 400.0879 unit equivalents outstanding at September 30, 2012 and December 31, 2011 | 483,326 | 606,621 | ||||||
Limited Partners, 30,324.9177 and 36,257.5397 Redeemable Units outstanding at September 30, 2012 and December 31, 2011, respectively | 36,634,096 | 54,974,586 | ||||||
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Total partners’ capital | 37,117,422 | 55,581,207 | ||||||
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Total liabilities and partners’ capital | $ | 40,172,343 | $ | 56,931,451 | ||||
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Net asset value per unit | $ | 1,208.05 | $ | 1,516.22 | ||||
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See accompanying notes to financial statements.
3
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Westport JWH Futures Fund L.P.
Condensed Schedule of Investments
September 30, 2012
(Unaudited)
Number of Contracts | Fair Value | % of Partners’ Capital | ||||||||||
Futures Contracts Purchased | ||||||||||||
Currencies | 34 | $ | (2,393 | ) | (0.00 | )*% | ||||||
Energy | 6 | (14,405 | ) | (0.04 | ) | |||||||
Grains | 22 | 124,019 | 0.33 | |||||||||
Indices | 30 | (49,442 | ) | (0.13 | ) | |||||||
Interest Rates U.S. | 43 | 7,775 | 0.02 | |||||||||
Interest Rates Non-U.S. | 25 | 806 | 0.00 | * | ||||||||
Metals | 7 | 57,275 | 0.15 | |||||||||
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Total futures contracts purchased | 123,635 | 0.33 | ||||||||||
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Futures Contracts Sold | ||||||||||||
Energy | 7 | (7,460 | ) | (0.02 | ) | |||||||
Interest Rates Non-U.S. | 2 | (6,535 | ) | (0.02 | ) | |||||||
Livestock | 9 | 970 | 0.00 | * | ||||||||
Softs | 8 | (1,090 | ) | (0.00 | )* | |||||||
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Total futures contracts sold | (14,115 | ) | (0.04 | ) | ||||||||
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Unrealized Appreciation on Open Forward Contracts | ||||||||||||
Metals | 29 | 27,618 | 0.08 | |||||||||
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Net unrealized appreciation on open forward contracts | 27,618 | 0.08 | ||||||||||
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Unrealized Depreciation on Open Forward Contracts | ||||||||||||
Metals | 12 | (76,931 | ) | (0.21 | ) | |||||||
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Net unrealized depreciation on open forward contracts | (76,931 | ) | (0.21 | ) | ||||||||
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Investment in JWH Master | 34,377,751 | 92.62 | ||||||||||
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Net fair value | $ | 34,437,958 | 92.78 | % | ||||||||
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*Due to rounding.
See accompanying notes to financial statements.
4
Table of Contents
Westport JWH Futures Fund L.P.
Condensed Schedule of Investments
December 31, 2011
Number of Contracts | Fair Value | % of Partners’ Capital | ||||||||||
Futures Contracts Purchased | ||||||||||||
Currencies | 6 | $ | (4,660 | ) | (0.01 | )% | ||||||
Interest Rates U.S. | 24 | 27,266 | 0.05 | |||||||||
Interest Rates Non-U.S. | 48 | 92,019 | 0.17 | |||||||||
Livestock | 9 | (5,400 | ) | (0.01 | ) | |||||||
Metals | 4 | (61,160 | ) | (0.11 | ) | |||||||
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Total futures contracts purchased | 48,065 | 0.09 | ||||||||||
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Futures Contracts Sold | ||||||||||||
Currencies | 61 | (39,413 | ) | (0.07 | ) | |||||||
Energy | 34 | 158,416 | 0.28 | |||||||||
Grains | 25 | (41,261 | ) | (0.07 | ) | |||||||
Indices | 26 | 479 | 0.00 | * | ||||||||
Interest Rates U.S. | 15 | (938 | ) | (0.00 | )* | |||||||
Metals | 2 | (1,775 | ) | (0.00 | )* | |||||||
Softs | 22 | 52,830 | 0.09 | |||||||||
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Total futures contracts sold | 128,338 | 0.23 | ||||||||||
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Unrealized Appreciation on Open Forward Contracts | ||||||||||||
Metals | 14 | 28,388 | 0.05 | |||||||||
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Net unrealized appreciation on open forward contracts | 28,388 | 0.05 | ||||||||||
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Investment in JWH Master | 49,319,514 | 88.73 | ||||||||||
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Net fair value | $ | 49,524,305 | 89.10 | % | ||||||||
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* | Due to rounding. |
See accompanying notes to financial statements.
5
Table of Contents
Westport JWH Futures Fund L.P.
Statements of Income and Expenses and Changes in Partners’ Capital
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Investment Income: | ||||||||||||||||
Interest income | $ | 745 | $ | 224 | $ | 2,072 | $ | 2,259 | ||||||||
Interest income from investment in JWH Master | 4,651 | 1,702 | 12,384 | 15,191 | ||||||||||||
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Total investment income | 5,396 | 1,926 | 14,456 | 17,450 | ||||||||||||
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Expenses: | ||||||||||||||||
Brokerage fees including clearing fees | 597,705 | 895,148 | 1,922,619 | 2,726,832 | ||||||||||||
Management fees | 214,243 | 331,270 | 693,852 | 1,003,152 | ||||||||||||
Incentive fees | — | 580 | — | 5,273 | ||||||||||||
Other | 56,140 | 53,723 | 230,367 | 254,060 | ||||||||||||
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Total expenses | 868,088 | 1,280,721 | 2,846,838 | 3,989,317 | ||||||||||||
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Net investment income (loss) | (862,692 | ) | (1,278,795 | ) | (2,832,382 | ) | (3,971,867 | ) | ||||||||
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Trading Results: | ||||||||||||||||
Net gains (losses) on trading of commodity interests and investment in JWH Master | ||||||||||||||||
Net realized gains (losses) on closed contracts | (358,867 | ) | (63,022 | ) | (239,895 | ) | (453,840 | ) | ||||||||
Net realized gains (losses) on investment in JWH Master | (2,345,046 | ) | 2,415,415 | (6,032,520 | ) | 4,289,872 | ||||||||||
Change in net unrealized gains (losses) on open contracts | 240,481 | 612,136 | (144,584 | ) | 34,006 | |||||||||||
Change in net unrealized gains (losses) on investment in JWH Master | 393,507 | 3,267,653 | (1,955,233 | ) | 64,944 | |||||||||||
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Total trading results | (2,069,925 | ) | 6,232,182 | (8,372,232 | ) | 3,934,982 | ||||||||||
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Net income (loss) | (2,932,617 | ) | 4,953,387 | (11,204,614 | ) | (36,885 | ) | |||||||||
Subscriptions-Limited Partners | 350,000 | 744,000 | 3,320,000 | 4,374,782 | ||||||||||||
Redemptions-Limited Partners | (3,593,843 | ) | (542,431 | ) | (10,579,171 | ) | (4,114,394 | ) | ||||||||
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Net increase (decrease) in Partners’ Capital | (6,176,460 | ) | 5,154,956 | (18,463,785 | ) | 223,503 | ||||||||||
Partners’ Capital, beginning of period | 43,293,882 | 59,764,258 | 55,581,207 | 64,695,711 | ||||||||||||
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Partners’ Capital, end of period | $ | 37,117,422 | $ | 64,919,214 | $ | 37,117,422 | $ | 64,919,214 | ||||||||
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Net asset value per unit (30,725.0056 and 37,253.6611 units outstanding at September 30, 2012 and 2011, respectively) | $ | 1,208.05 | $ | 1,742.63 | $ | 1,208.05 | $ | 1,742.63 | ||||||||
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Net income (loss) per unit* | $ | (89.58 | ) | $ | 133.50 | $ | (308.17 | ) | $ | 1.58 | ||||||
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Weighted average units outstanding | 33,232.2183 | 37,235.4953 | 35,214.1116 | 37,591.3365 | ||||||||||||
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* | Based on change in net asset value per unit. |
See accompanying notes to financial statements.
6
Table of Contents
Westport JWH Futures Fund L.P.
September 30, 2012
(Unaudited)
1. General:
Westport JWH Futures Fund L.P. (the “Partnership”) is a limited partnership organized on March 21, 1997 under the partnership laws of the State of New York to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests, including futures contracts, commodity options, forward contracts and any other rights or interest pertaining thereto including interests in commodity pools. The sectors traded include energy, currencies, grains, U.S. and non-U.S. interest rates, indices, softs, livestock and metals. The Partnership commenced trading on August 1, 1997. The commodity interests that are traded by the Partnership, directly, and through its investment in JWH Master Fund LLC (“JWH Master”), are volatile and involve a high degree of market risk. The Partnership privately and continuously offers redeemable units (“Redeemable Units”) to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. The General Partner is wholly owned by Morgan Stanley Smith Barney Holdings LLC (“MSSB Holdings”). Morgan Stanley, indirectly through various subsidiaries, owns a majority equity interest in MSSB Holdings. Citigroup Inc. indirectly owns a minority equity interest in MSSB Holdings. Citigroup Inc. also indirectly owns Citigroup Global Markets Inc. (“CGM”), the commodity broker and selling agent for the Partnership. Prior to July 31, 2009, the date as of which MSSB Holdings became its owner, the General Partner was wholly owned by Citigroup Financial Products Inc., a wholly owned subsidiary of Citigroup Global Markets Holdings Inc., the sole owner of which is Citigroup Inc.
As of September 30, 2012, all trading decisions for the Partnership are made by John W. Henry & Company, Inc. (the “Advisor”).
The General Partner and each limited partner of the Partnership share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each except, that no limited partner is liable for obligations of the Partnership in excess of its capital contribution and profits or losses, if any, net of distributions.
The accompanying financial statements and accompanying notes are unaudited but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Partnership’s financial condition at September 30, 2012, and December 31, 2011, and the results of its operations and changes in partners’ capital for the three and nine months ended September 30, 2012, and 2011. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. You should read these financial statements together with the financial statements and notes included in the Partnership’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2011.
The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.
Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.
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Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
2. Financial Highlights:
Changes in the net asset value per unit for the three and nine months ended September 30, 2012 and 2011 were as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Net realized and unrealized gains (losses)* | $ | (81.62 | ) | $ | 143.83 | $ | (282.38 | ) | $ | 34.75 | ||||||
Interest income | 0.16 | 0.05 | 0.41 | 0.48 | ||||||||||||
Expenses** | (8.12 | ) | (10.38 | ) | (26.20 | ) | (33.65 | ) | ||||||||
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Increase (decrease) for the period | (89.58 | ) | 133.50 | (308.17 | ) | 1.58 | ||||||||||
Net asset value per unit, beginning of period | 1,297.63 | 1,609.13 | 1,516.22 | 1,741.05 | ||||||||||||
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Net asset value per unit, end of period | $ | 1,208.05 | $ | 1,742.63 | $ | 1,208.05 | $ | 1,742.63 | ||||||||
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* Includes brokerage fees and clearing fees.
** Excludes brokerage fees and clearing fees.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011*** | 2012 | 2011*** | |||||||||||||
Ratios to average net assets:**** | ||||||||||||||||
Net investment income (loss) | (8.2 | )% | (7.9 | )% | (8.2 | )% | (8.0 | )% | ||||||||
Incentive fees | 0 | % | 0.0 | %****** | 0 | % | 0.0 | %****** | ||||||||
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Net investment income (loss) before incentive fees***** | (8.2 | )% | (7.9 | )% | (8.2 | )% | (8.0 | )% | ||||||||
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Operating expense | 8.2 | % | 7.9 | % | 8.2 | % | 8.1 | % | ||||||||
Incentive fees | 0 | % | 0.0 | %****** | 0 | % | 0.0 | %****** | ||||||||
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Total expenses | 8.2 | % | 7.9 | % | 8.2 | % | 8.1 | % | ||||||||
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Total return: | ||||||||||||||||
Total return before incentive fees | (6.9 | )% | 8.3 | % | (20.3 | )% | 0.1 | % | ||||||||
Incentive fees | 0 | % | 0.0 | %****** | 0 | % | 0.0 | %****** | ||||||||
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Total return after incentive fees | (6.9 | )% | 8.3 | % | (20.3 | )% | 0.1 | % | ||||||||
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*** | The ratios are shown net and gross of incentive fees to conform to current period presentation. |
**** | Annualized (other than incentive fees). |
***** | Interest income less total expenses. |
****** | Due to rounding. |
The above ratios may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class using the limited partners’ share of income, expenses and average net assets.
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Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The results of the Partnership’s trading activities are shown in the Statements of Income and Expenses and Changes in Partners’ Capital.
The customer agreements between the Partnership and CGM and JWH Master and CGM give the Partnership and JWH Master, respectively, the legal right to net unrealized gains and losses on open futures and open forward contracts. The Partnership and JWH Master net, for financial reporting purposes, the unrealized gains and losses on open futures and on open forward contracts on the Statements of Financial Condition as the criteria under Accounting Standards Codification (“ASC”) 210-20, “Balance Sheet” have been met.
All of the commodity interests owned by the Partnership are held for trading purposes. The monthly average number of futures contracts traded directly by the Partnership during the three months ended September 30, 2012 and 2011 were 229 and 273, respectively. The monthly average number of futures contracts traded directly by the Partnership during the nine months ended September 30, 2012 and 2011 were 262 and 275, respectively. The monthly average number of metal forward contracts traded directly by the Partnership during the three months ended September 30, 2012 and 2011 were 32 and 45, respectively. The monthly average number of metal forward contracts traded directly by the Partnership during the nine months ended September 30, 2012 and 2011 were 32 and 29, respectively.
The monthly average number of futures contracts traded by JWH Master during the three months ended September 30, 2012 and 2011 were 3,080 and 2,604, respectively. The monthly average number of futures contracts traded by JWH Master during the nine months ended September 30, 2012 and 2011 were 2,414 and 2,216, respectively. The monthly average number of metal forward contracts traded by JWH Master during the three months ended September 30, 2012 and 2011 were 401 and 0, respectively. The monthly average number of metal forward contracts traded by JWH Master during the nine months ended September 30, 2012 and 2011 were 202 and 0, respectively. The monthly average notional values of currency forward contracts held by JWH Master during the three months ended September 30, 2012 and 2011 were $28,310,952 and $0, respectively. The monthly average notional values of currency forward contracts held by JWH Master during the nine months ended September 30, 2012 and 2011 were $14,128,615 and $0, respectively.
Brokerage fees are calculated as a percentage of the Partnership’s adjusted net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions.
9
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
The following tables indicate the Partnership’s gross fair values of derivative instruments of futures and forward contracts traded directly by the Partnership as separate assets and liabilities as of September 30, 2012 and December 31, 2011.
Assets | | September 30, 2012 | | |
Futures Contracts | ||||
Currencies | $ | 3,413 | ||
Energy | 4,395 | |||
Grains | 134,795 | |||
Interest Rates U.S. | 8,150 | |||
Interest Rates Non-U.S. | 3,377 | |||
Livestock | 970 | |||
Metals | 57,275 | |||
Softs | 75 | |||
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Total unrealized appreciation on open futures contracts | $ | 212,450 | ||
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Liabilities | ||||
Futures Contracts | ||||
Currencies | $ | (5,806 | ) | |
Energy | (26,260 | ) | ||
Grains | (10,776 | ) | ||
Indices | (49,442 | ) | ||
Interest Rates U.S. | (375 | ) | ||
Interest Rates Non-U.S. | (9,106 | ) | ||
Softs | (1,165 | ) | ||
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Total unrealized depreciation on open futures contracts | $ | (102,930 | ) | |
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Net unrealized appreciation on open futures contracts | $ | 109,520 | * | |
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Assets | ||||
Forward Contracts | ||||
Metals | $ | 27,618 | ||
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Total unrealized appreciation on open forward contracts | $ | 27,618 | ||
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Liabilities | ||||
Forward Contracts | ||||
Metals | $ | (76,931 | ) | |
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Total unrealized depreciation on open forward contracts | $ | (76,931 | ) | |
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Net unrealized depreciation on open forward contracts | $ | (49,313 | )** | |
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* | This amount is in “Net unrealized appreciation on open futures contracts” on the Statements of Financial Condition. |
** | This amount is in “Net unrealized depreciation on open forward contracts” on the Statements of Financial Condition. |
10
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
December 31, 2011 | ||||
Assets | ||||
Futures Contracts | ||||
Currencies | $ | 13,437 | ||
Energy | 165,786 | |||
Indices | 13,946 | |||
Interest Rates U.S. | 27,266 | |||
Interest Rates Non-U.S. | 93,581 | |||
Softs | 52,830 | |||
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Total unrealized appreciation on open futures contracts | $ | 366,846 | ||
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Liabilities | ||||
Futures Contracts | ||||
Currencies | $ | (52,850 | ) | |
Energy | (12,030 | ) | ||
Grains | (41,261 | ) | ||
Indices | (13,467 | ) | ||
Interest Rates U.S. | (938 | ) | ||
Interest Rates Non-U.S. | (1,562 | ) | ||
Livestock | (5,400 | ) | ||
Metals | (62,935 | ) | ||
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Total unrealized depreciation on open futures contracts | $ | (190,443 | ) | |
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Net unrealized appreciation on open futures contracts | $ | 176,403 | * | |
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Assets | ||||
Forward Contracts | ||||
Metals | $ | 28,388 | ||
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Net unrealized appreciation on open forward contracts | $ | 28,388 | ** | |
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* | This amount is in “Net unrealized appreciation on open futures contracts” on the Statements of Financial Condition. |
** | This amount is in “Net unrealized appreciation on open forward contracts” on the Statements of Financial Condition. |
The following tables indicate the trading gains and losses, by market sector, on derivative instruments traded directly by the Partnership for the three and nine months ended September 30, 2012 and 2011.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Sector | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Currencies | $ | 21,762 | $ | (122,970 | ) | $ | (511,779 | ) | $ | (347,204 | ) | |||||
Energy | (206,961 | ) | 181,931 | 32,928 | (109,991 | ) | ||||||||||
Grains | 104,143 | (63,360 | ) | 79,568 | (189,793 | ) | ||||||||||
Indices | 11,439 | (160,944 | ) | (64,930 | ) | (413,564 | ) | |||||||||
Interest Rates U.S. | 19,713 | 317,946 | 11,531 | 324,972 | ||||||||||||
Interest Rates Non-U.S. | 22,246 | 343,763 | 157,948 | 327,452 | ||||||||||||
Livestock | (25,830 | ) | 12,600 | (11,170 | ) | (31,790 | ) | |||||||||
Metals | (14,394 | ) | 171,660 | (52,639 | ) | 101,190 | ||||||||||
Softs | (50,504 | ) | (131,512 | ) | (25,936 | ) | (81,106 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (118,386 | )*** | $ | 549,114 | *** | $ | (384,479 | )*** | $ | (419,834 | )*** | ||||
|
|
|
|
|
|
|
|
*** | This amount is included in “Total trading results” on the Statements of Income and Expenses and Changes in Partners’ Capital. |
11
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
4. Fair Value Measurements:
Partnership’s and JWH Master’s Investments. All commodity interests held by the Partnership and JWH Master (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gain or loss from the preceding period are reported in the Statements of Income and Expenses and Changes in Partners’/Members’ Capital.
Partnership’s and JWH Master’s Fair Value Measurements. Fair Value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the Partnership’s and JWH Master’s Level 1 assets and liabilities are actively traded.
GAAP also requires the use of judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s and JWH Master’s Level 2 assets and liabilities.
The Partnership and JWH Master will separately present purchases, sales, issuances and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required by GAAP.
Effective January 1, 2012, the Partnership adopted Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards” [(“IFRS”).] The amendments within this ASU change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between GAAP and IFRS. However, some of the amendments clarify the Financial Accounting Standards Board’s (“FASB”) intent about the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This new guidance did not have a significant impact on the Partnership’s financial statements.
12
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
The Partnership and JWH Master consider prices for exchange-traded commodity futures and forward contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forward contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). Investments in JWH Master (or other commodity pools) with no rights or obligations inherent within the ownership interest held by the Partnership are priced based on the end of the day net asset value of JWH Master (Level 2). The value of the Partnership’s investment in JWH Master reflects its proportional interest in JWH Master. As of and for the periods ended September 30, 2012, and December 31, 2011, the Partnership and JWH Master did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).
During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.
September 30, 2012 | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets | ||||||||||||||||
Futures | $ | 212,450 | $ | 212,450 | $ | — | $ | — | ||||||||
Forwards | 27,618 | 27,618 | — | — | ||||||||||||
Investment in JWH Master | 34,377,751 | — | 34,377,751 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | $ | 34,617,819 | $ | 240,068 | $ | 34,377,751 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Futures | $ | 102,930 | $ | 102,930 | $ | — | $ | — | ||||||||
Forwards | 76,931 | 76,931 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | $ | 179,861 | $ | 179,861 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net fair value | $ | 34,437,958 | $ | 60,207 | $ | 34,377,751 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Quoted Prices in | ||||||||||||||||
Active Markets for | ||||||||||||||||
Identical Assets and Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
December 31, 2011 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets | ||||||||||||||||
Forwards | $ | 28,388 | $ | 28,388 | $ | — | $ | — | ||||||||
Futures | 366,846 | 366,846 | — | — | ||||||||||||
Investment in JWH Master | 49,319,514 | — | 49,319,514 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | $ | 49,714,748 | $ | 395,234 | $ | 49,319,514 | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Futures | $ | 190,443 | $ | 190,443 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | 190,443 | 190,443 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net fair value | $ | 49,524,305 | $ | 204,791 | $ | 49,319,514 | $ | — | ||||||||
|
|
|
|
|
|
|
|
13
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
5. Investment in JWH Master:
The Advisor trades a portion of the assets allocated to the Advisor directly, in accordance with the systematic JWH Diversified Plus Program. On January 2, 2008, 80% of the assets allocated to the Advisor for trading were invested in JWH Master, a limited liability company organized under the laws of the State of New York. The Partnership purchased 29,209.3894 units of JWH Master (each, a “Unit of Member Interest”) with cash equal to $39,540,753. JWH Master was formed in order to permit accounts managed by the Advisor using the JWH Global Analytics Program (the “Global Analytics Program”), a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is the managing member of JWH Master. Individual and pooled accounts currently managed by the Advisor, including the Partnership, are permitted to be non-managing members of JWH Master. The General Partner and the Advisor believe that trading through this structure promotes efficiency and economy in the trading process. Expenses to investors as a result of the investment in JWH Master are approximately the same and redemptions rights are not affected.
The General Partner is not aware of any material changes to the trading program discussed above during the fiscal quarter ended September 30, 2012.
The Partnership’s and JWH Master’s trading of futures and forward contracts, if applicable, on commodities is done primarily on U.S. commodity exchanges and foreign commodity exchanges. The Partnership and JWH Master engage in such trading through commodity brokerage accounts maintained by CGM.
A non-managing member may withdraw all or part of its redeemable capital contributions and undistributed profits, if any, from JWH Master in multiples of the net asset value per Unit of Member Interest as of the end of any day (the “Redemption Date”), after a request for redemption has been made to the managing member at least three days in advance of the Redemption Date. The Unit of Member Interest is classified as a liability when the non-managing member elects to redeem and informs JWH Master.
Management and incentive fees are charged at the Partnership level. All exchange, clearing, user, give-up, floor brokerage, and National Futures Association fees (collectively, the “clearing fees”) are borne by the Partnership directly and through its investment in JWH Master. All other fees including CGM’s direct brokerage fees are charged at the Partnership level.
14
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
At September 30, 2012, the Partnership owned approximately 86.8% of JWH Master. At December 31, 2011, the Partnership owned approximately 88.7% of JWH Master. The Partnership intends to continue to invest a portion of its assets in JWH Master. The performance of the Partnership is directly affected by the performance of JWH Master.
The Master’s Statements of Financial Condition and Condensed Schedules of Investments as of September 30, 2012 and December 31, 2011 and Statements of Income and Expenses and Changes in Members’ Capital for the three and nine months ended September 30, 2012 and 2011 are presented below:
JWH Master Fund LLC
Statements of Financial Condition
(Unaudited) September 30, | December 31, | |||||||
2012 | 2011 | |||||||
Assets: | ||||||||
Equity in trading account: | ||||||||
Cash | $ | 32,439,351 | $ | 43,003,090 | ||||
Cash margin | 7,208,708 | 10,415,335 | ||||||
Net unrealized appreciation on open futures contracts | 93,493 | 2,255,526 | ||||||
|
|
|
| |||||
Total assets | $ | 39,741,552 | $ | 55,673,951 | ||||
|
|
|
| |||||
Liabilities and Members’ Capital: | ||||||||
Liabilities: | ||||||||
Net unrealized depreciation on open forward contracts | $ | 86,638 | $ | 0 | ||||
Accrued expenses: | ||||||||
Professional fees | 58,024 | 73,280 | ||||||
|
|
|
| |||||
Total liabilities | 144,662 | 73,280 | ||||||
|
|
|
| |||||
Members’ Capital: | ||||||||
Members’ Capital, 14,945.8843 and 17,428.5973 units outstanding at September 30, 2012 and December 31, 2011, respectively | 39,596,890 | 55,600,671 | ||||||
|
|
|
| |||||
Total liabilities and members’ capital | $ | 39,741,552 | $ | 55,673,951 | ||||
|
|
|
| |||||
Net asset value per unit | $ | 2,649.35 | $ | 3,190.20 | ||||
|
|
|
|
15
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
JWH Master Fund LLC
Condensed Schedule of Investments
September 30, 2012
(Unaudited)
Notional $/ Number of Contracts | Fair Value | % of Members’ Capital | ||||||||||
Futures Contracts Purchased | ||||||||||||
Currencies | 309 | $ | (68,913 | ) | (0.17 | )% | ||||||
Energy | 126 | 92,167 | 0.23 | |||||||||
Indices | 332 | (372,700 | ) | (0.94 | ) | |||||||
Interest Rates U.S. | 1,320 | 3,557 | 0.01 | |||||||||
Interest Rates Non-U.S. | 558 | 100,876 | 0.26 | |||||||||
Metals | 60 | 561,780 | 1.41 | |||||||||
Softs | 157 | (8,873 | ) | (0.02 | ) | |||||||
|
|
|
| |||||||||
Total futures contracts purchased | 307,894 | 0.78 | ||||||||||
|
|
|
| |||||||||
Futures Contracts Sold | ||||||||||||
Energy | 12 | (52,710 | ) | (0.13 | ) | |||||||
Grains | 33 | (50,325 | ) | (0.13 | ) | |||||||
Softs | 359 | (111,366 | ) | (0.28 | ) | |||||||
|
|
|
| |||||||||
Total futures contracts sold | (214,401 | ) | (0.54 | ) | ||||||||
|
|
|
| |||||||||
Unrealized Appreciation on Open Forward Contracts | ||||||||||||
Currencies | $ | 7,115,303 | 55,321 | 0.14 | ||||||||
Metals | 243 | 954,820 | 2.41 | |||||||||
|
|
|
| |||||||||
Total unrealized appreciation on open forward contracts | 1,010,141 | 2.55 | ||||||||||
|
|
|
| |||||||||
Unrealized Depreciation on Open Forward Contracts | ||||||||||||
Currencies | $ | 6,233,212 | (64,223 | ) | (0.16 | ) | ||||||
Metals | 201 | (1,032,556 | ) | (2.61 | ) | |||||||
|
|
|
| |||||||||
Total unrealized depreciation on open forward contracts | (1,096,779 | ) | (2.77 | ) | ||||||||
|
|
|
| |||||||||
Net fair value | $ | 6,855 | 0.02 | % | ||||||||
|
|
|
|
16
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
JWH Master Fund LLC
Condensed Schedule of Investments
December 31, 2011
Number of Contracts | Fair Value | % of Members’ Capital | ||||||||||
Futures Contracts Purchased | ||||||||||||
Grains | 39 | $ | (688 | ) | (0.00 | )%* | ||||||
Interest Rates U.S. | 272 | 249,655 | 0.45 | |||||||||
Interest Rates Non-U.S. | 325 | 506,564 | 0.91 | |||||||||
|
|
|
| |||||||||
Total futures contracts purchased | 755,531 | 1.36 | ||||||||||
|
|
|
| |||||||||
Futures Contracts Sold | ||||||||||||
Currencies | 339 | (132,556 | ) | (0.24 | ) | |||||||
Energy | 212 | 104,106 | 0.19 | |||||||||
Grains | 38 | (102,125 | ) | (0.18 | ) | |||||||
Indices | 44 | 63,495 | 0.11 | |||||||||
Interest Rates U.S. | 138 | (8,475 | ) | (0.02 | ) | |||||||
Metals | 236 | 1,315,470 | 2.36 | |||||||||
Softs | 588 | 260,080 | 0.47 | |||||||||
|
|
|
| |||||||||
Total futures contracts sold | 1,499,995 | 2.69 | ||||||||||
|
|
|
| |||||||||
Net fair value | $ | 2,255,526 | 4.05 | % | ||||||||
|
|
|
|
* | Due to rounding. |
17
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
JWH Master Fund LLC
Statements of Income and Expenses and Changes in Members’ Capital
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Investment Income: | ||||||||||||||||
Interest income | $ | 5,520 | $ | 2,271 | $ | 14,562 | $ | 20,290 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total investment income | 5,520 | 2,271 | 14,562 | 20,290 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses: | ||||||||||||||||
Clearing fees | 32,243 | 22,306 | 88,239 | 69,708 | ||||||||||||
Professional fees | 16,020 | 4,494 | 51,342 | 56,331 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | 48,263 | 26,800 | 139,581 | 126,039 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income (loss) | (42,743 | ) | (24,529 | ) | (125,019 | ) | (105,749 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Trading Results: | ||||||||||||||||
Net gains (losses) on trading of commodity interests: | ||||||||||||||||
Net realized gains (losses) on closed contracts | (2,687,349 | ) | 3,069,927 | (6,818,152 | ) | 5,436,667 | ||||||||||
Change in net unrealized gains (losses) on open contracts | 435,259 | 4,117,918 | (2,248,671 | ) | 48,212 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total trading results | (2,252,090 | ) | 7,187,845 | (9,066,823 | ) | 5,484,879 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) | (2,294,833 | ) | 7,163,316 | (9,191,842 | ) | 5,379,130 | ||||||||||
Subscriptions | 280,000 | 870,200 | 3,165,975 | 3,974,826 | ||||||||||||
Redemptions | (2,308,090 | ) | (2,974,802 | ) | (9,963,352 | ) | (8,028,373 | ) | ||||||||
Distribution of interest income to feeder funds | (5,520 | ) | (2,271 | ) | (14,562 | ) | (20,290 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in Members’ Capital | (4,328,443 | ) | 5,056,443 | (16,003,781 | ) | 1,305,293 | ||||||||||
Members’ capital, beginning of period | 43,925,333 | 68,240,490 | 55,600,671 | 71,991,640 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Members’ capital, end of period | $ | 39,596,890 | $ | 73,296,933 | $ | 39,596,890 | $ | 73,296,933 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value per unit (14,945.8843 and 20,080.8437 units outstanding at September 30, 2012 and 2011, respectively) | $ | 2,649.35 | $ | 3,650.09 | $ | 2,649.35 | $ | 3,650.09 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) per unit* | $ | (155.50 | ) | $ | 354.71 | $ | (539.95 | ) | $ | 262.27 | ||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average units outstanding | 15,437.7164 | 20,409.3753 | 16,594.3633 | 20,957.7650 | ||||||||||||
|
|
|
|
|
|
|
|
* | Based on change in net asset value per unit. |
18
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
JWH Master considers prices for exchange-traded commodity futures and forward contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forward contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the period ended December 31, 2011, JWH Master did not hold any derivative instruments for which market quotations were not readily available and which were priced by broker-dealers that derive fair values from those assets from observable inputs (Level 2). As of and for the period ended September 30, 2012, and December 31, 2011, JWH Master did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).
For the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.
September 30, 2012 | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets | ||||||||||||||||
Futures | $ | 905,309 | $ | 905,309 | $ | — | $ | — | ||||||||
Forwards | 1,010,141 | 954,820 | 55,321 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | 1,915,450 | 1,860,129 | 55,321 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Futures | $ | 811,816 | $ | 811,816 | $ | — | $ | — | ||||||||
Forwards | 1,096,779 | 1,032,556 | 64,223 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | | 1,908,595 | | 1,844,372 | 64,223 | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net fair value | $ | 6,855 | $ | 15,757 | $ | (8,902 | ) | $ | — | |||||||
|
|
|
|
|
|
|
| |||||||||
December 31, 2011 | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets | ||||||||||||||||
Futures | $ | 3,003,214 | $ | 3,003,214 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | 3,003,214 | 3,003,214 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Futures | $ | 747,688 | $ | 747,688 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | 747,688 | 747,688 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net fair value | $ | 2,255,526 | $ | 2,255,526 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
19
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
Financial Highlights of JWH Master:
Changes in the net asset value per unit for the three and nine months ended September 30, 2012, and 2011 were as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Net realized and unrealized gains (losses)* | $ | (154.81 | ) | $ | 354.82 | $ | (537.66 | ) | $ | 263.98 | ||||||
Interest income | 0.36 | 0.11 | 0.90 | 0.97 | ||||||||||||
Expenses** | (1.05 | ) | (0.22 | ) | (3.19 | ) | (2.68 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Increase (decrease) for the period | (155.50 | ) | 354.71 | (539.95 | ) | 262.27 | ||||||||||
Distributions of interest income to feeder funds | (0.36 | ) | (0.11 | ) | (0.90 | ) | (0.97 | ) | ||||||||
Net asset value per unit, beginning of period | 2,805.21 | 3,295.49 | 3,190.20 | 3,388.79 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value per unit, end of period | $ | 2,649.35 | $ | 3,650.09 | $ | 2,649.35 | $ | 3,650.09 | ||||||||
|
|
|
|
|
|
|
|
* | Includes clearing fees. |
** | Excludes clearing fees. |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Ratios to average net assets:*** | ||||||||||||||||
Net investment income (loss)**** | (0.4 | )% | (0.1 | )% | (0.4 | )% | (0.2 | )% | ||||||||
|
|
|
|
|
|
|
| |||||||||
Operating expenses | 0.5 | % | 0.2 | % | 0.4 | % | 0.2 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return | (5.6 | )% | 10.8 | % | (17.0 | )% | 7.7 | % | ||||||||
|
|
|
|
|
|
|
|
*** | Annualized. |
**** | Interest income less total expenses. |
The above ratios may vary for individual investors based on the timing of capital transactions during the period.
Additionally, these ratios are calculated for the non-managing member class using the non-managing member’s share of income, expenses and average net assets.
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Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
The following tables indicate JWH Master’s gross fair values of derivative instruments of futures and forward contracts as separate assets and liabilities as of September 30, 2012, and December 31, 2011.
September 30, 2012 | ||||
Assets | ||||
Futures Contracts | ||||
Currencies | $ | 49,525 | ||
Energy | 109,667 | |||
Interest Rates U.S. | 19,494 | |||
Interest Rates Non-U.S. | 123,973 | |||
Metals | 561,780 | |||
Softs | 40,870 | |||
|
| |||
Total unrealized appreciation on open futures contracts | $ | 905,309 | ||
|
| |||
Liabilities | ||||
Futures Contracts | ||||
Currencies | $ | (118,438 | ) | |
Energy | (70,210 | ) | ||
Grains | (50,325 | ) | ||
Indices | (372,700 | ) | ||
Interest Rates U.S. | (15,937 | ) | ||
Interest Rates Non-U.S. | (23,097 | ) | ||
Softs | (161,109 | ) | ||
|
| |||
Total unrealized depreciation on open futures contracts | $ | (811,816 | ) | |
|
| |||
Net unrealized appreciation on open futures contracts | $ | 93,493 | * | |
|
|
September 30, 2012 | ||||
Assets | ||||
Forward Contracts | ||||
Currencies | $ | 55,321 | ||
Metals | 954,820 | |||
|
| |||
Total unrealized appreciation on open forward contracts | $ | 1,010,141 | ||
|
| |||
Liabilities | ||||
Forward Contracts | ||||
Currencies | $ | (64,223 | ) | |
Metals | (1,032,556 | ) | ||
|
| |||
Total unrealized depreciation on open forward contracts | $ | (1,096,779 | ) | |
|
| |||
Net unrealized depreciation on open forward contracts | $ | (86,638 | )** | |
|
|
* | This amount is in “Net unrealized appreciation on open futures contracts” on JWH Master’s Statements of Financial Condition. |
** | This amount is in “Net unrealized depreciation on open forward contracts” on JWH Master’s Statements of Financial Condition. |
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Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
December 31, 2011 | ||||
Assets | ||||
Futures Contracts | ||||
Currencies | $ | 80,306 | ||
Energy | 318,606 | |||
Indices | 69,731 | |||
Interest Rates U.S. | 249,655 | |||
Interest Rates Non-U.S. | 512,801 | |||
Metals | 1,455,860 | |||
Softs | 316,255 | |||
|
| |||
Total unrealized appreciation on open futures contracts | $ | 3,003,214 | ||
|
| |||
Liabilities | ||||
Futures Contracts | ||||
Currencies | $ | (212,862 | ) | |
Energy | (214,500 | ) | ||
Grains | (102,812 | ) | ||
Indices | (6,237 | ) | ||
Interest Rates U.S. | (8,475 | ) | ||
Interest Rates Non-U.S. | (6,237 | ) | ||
Metals | (140,390 | ) | ||
Softs | (56,175 | ) | ||
|
| |||
Total unrealized depreciation on open futures contracts | $ | (747,688 | ) | |
|
| |||
Net unrealized appreciation on open futures contracts | $ | 2,255,526 | * | |
|
|
* | This amount is in “Net unrealized appreciation on open futures contracts” on JWH Master’s Statements of Financial Condition. |
22
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Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
The following tables indicate JWH Master’s total trading gains and losses, by market sector, on derivative instruments for the three and nine months ended September 30, 2012, and 2011.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Sector | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Currencies | $ | (109,140 | ) | $ | 974,336 | $ | (1,716,690 | ) | $ | 177,106 | ||||||
Energy | (2,071,381 | ) | (1,145,165 | ) | (1,147,213 | ) | 86,274 | |||||||||
Grains | 1,720,863 | (675,562 | ) | 511,100 | (4,366,738 | ) | ||||||||||
Indices | (540,190 | ) | 94,951 | (685,079 | ) | (1,217,477 | ) | |||||||||
Interest Rates U.S. | 138,043 | 3,480,976 | (670,455 | ) | 3,727,285 | |||||||||||
Interest Rates Non-U.S. | (580,094 | ) | 4,923,428 | 274,320 | 4,944,464 | |||||||||||
Metals | 159,102 | (118,275 | ) | (4,427,572 | ) | 723,680 | ||||||||||
Softs | (969,293 | ) | (346,844 | ) | (1,205,234 | ) | 1,410,285 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (2,252,090 | )** | $ | 7,187,845 | ** | $ | (9,066,823 | )** | $ | 5,484,879 | ** | ||||
|
|
|
|
|
|
|
|
** | This amount is in “Total trading results” on JWH Master’s Statements of Income and Expenses and Changes in Members’ Capital. |
6. Financial Instrument Risks:
In the normal course of business, the Partnership and JWH Master are parties to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures and option contracts, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, to purchase or sell other financial instruments on specific terms on specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange or over-the-counter (“OTC”). Exchange-traded instruments are standardized and include futures and certain forward and option contracts. OTC contracts are negotiated between contracting parties and include certain forward and option contracts. Each of these instruments is subject to various risks similar to those relating to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. The General Partner estimates at any given time approximately 0% to 17.6% of the Partnership’s / JWH Master’s contracts are traded OTC.
The risk to the limited partners that have purchased Redeemable Units is limited to the amount of their share of the Partnership’s net assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
Market risk is the potential for changes in the value of the financial instruments traded by the Partnership and JWH Master due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity 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 Partnership and JWH Master are exposed to market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.
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Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
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. The Partnership’s and JWH Master’s risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s and JWH Master’s risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership and JWH Master to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership and JWH Master have credit risk and concentration risk, as CGM or a CGM affiliate is the sole counterparty or broker with respect to the Partnership and JWH Master assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through CGM, the Partnership’s and JWH Master’s counterparty is an exchange or clearing organization.
The General Partner monitors and attempts to control the Partnership’s and JWH Master’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership and JWH Master may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, forwards and option contracts by sector, margin requirements, gain and loss transactions and collateral positions.
The majority of these financial instruments mature within one year of the inception date. However, due to the nature of the Partnership’s and JWH Master’s business, these instruments may not be held to maturity.
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Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
7. Critical Accounting Policies:
Use of Estimates. The preparation of financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.
Partnership’s and JWH Master’s Investments. All commodity interests held by the Partnership and JWH Master (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in commodity futures trading account on the Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Statements of Income and Expenses and Changes in Partners’/Members’ Capital.
Partnership’s and JWH Master’s Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management has concluded that based on available information in the marketplace, the Partnership’s and JWH Master’s Level 1 assets and liabilities are actively traded.
GAAP also requires the use of judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s Level 2 assets and liabilities.
The Partnership and JWH Master will separately present purchases, sales, issuances and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required by GAAP.
The Partnership and JWH Master consider prices for exchange-traded commodity futures, forward and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forward and option contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). Investments in JWH Master or (other commodity pools) where there are no other rights or obligations inherent within the ownership interest held by the Partnership are priced based on the end of the day net asset value (Level 2). The value of the Partnership’s investment in JWH Master reflects its proportional interest in JWH Master. As of and for the periods ended September 30, 2012 and December 31, 2011, the Partnership and JWH Master did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). During the nine months ended September 30, 2012, there were no transfers of assets or liabilities between Level 1 and Level 2.
25
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
Futures Contracts. The Partnership and JWH Master trade futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (“variation margin”) may be made or received by the Partnership and JWH Master each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Partnership and JWH Master. When the contract is closed, the Partnership and JWH Master record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and changes in net unrealized gains (losses) on futures contracts are included in the Statements of Income and Expenses and Changes in Partners’/Members’ Capital.
Forward Foreign Currency Contracts. Forward foreign currency contracts are those contracts where the Partnership and JWH Master agree to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Forward foreign currency contracts are valued daily, and the Partnership’s and JWH Master’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Financial Condition. Net realized gains (losses) and changes in net unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Statements of Income and Expenses and Changes in Partners’/Members’ Capital.
The Partnership and JWH Master do not isolate the portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in net income (loss) on investments in the Statements of Income and Expenses and Changes in Partners’/Members’ Capital.
London Metals Exchange Forward Contracts. Metal contracts traded on the London Metals Exchange (“LME”) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead, nickel, tin or zinc. LME contracts traded by the Partnership and JWH Master are cash settled based on prompt dates published by the LME. Payments (“variation margin”) may be made or received by the Partnership and JWH Master each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Partnership and JWH Master. A contract is considered offset when all long positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed at the prompt date, the Partnership and JWH Master record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in LME contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the broker, directly with the LME. Net realized gains (losses) and changes in net unrealized gains (losses) on metal contracts are included in the Statements of Income and Expenses and Changes in Partners’/Members’ Capital.
26
Table of Contents
Westport JWH Futures Fund L.P.
Notes to Financial Statements
September 30, 2012
(Unaudited)
Income Taxes. Income taxes have not been provided as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses.
GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements and requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions with respect to tax at the Partnership level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. The General Partner concluded that no provision for income tax is required in the Partnership’s financial statements.
The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2009 through 2011 tax years remain subject to examination by U.S. federal and most state tax authorities. The General Partner does not believe that there are any uncertain tax positions that require recognition of a tax liability.
Subsequent Events. The General Partner evaluates events that occur after the balance sheet date but before financial statements are filed. The General Partner has assessed the subsequent events through the date of filing and determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements.
Recent Accounting Pronouncements. In October 2011, FASB issued a proposed ASU intended to improve and converge financial reporting by setting forth consistent criteria for determining whether an entity is an investment company. Under longstanding GAAP, investment companies carry all of their investments at fair value, even if they hold a controlling interest in another company. The primary changes being proposed by FASB relate to which entities would be considered investment companies as well as certain disclosure and presentation requirements. In addition to the changes to the criteria for determining whether an entity is an investment company, FASB also proposes that an investment company consolidate another investment company if it holds a controlling financial interest in the entity. In August 2012, FASB updated the proposed ASU to state that entities regulated under the Investment Company Act of 1940 should qualify to be investment companies within the proposed investment company guidance. The Partnership will evaluate the impact that this proposed update would have on the financial statements once the pronouncement is issued.
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 arrangements 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 statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparisons between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on the basis of IFRS. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Partnership should also provide the disclosures retrospectively for all comparative periods presented. The Partnership is currently evaluating the impact that the pronouncement would have on the financial statements.
Net Income (Loss) per unit. Net income (loss) per unit is calculated in accordance with investment company guidance. See Note 2, “Financial Highlights.”
27
Table of Contents
Item | 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Liquidity and Capital Resources
The Partnership does not engage in sales of goods or services. Its assets are (i) investment in JWH Master, and (ii) equity in trading account, consisting of cash, cash margin, and net unrealized appreciation on open futures contracts, and (iii) interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the third quarter of 2012.
The Partnership’s capital consists of the capital contributions of its partners, as increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, subscriptions and redemptions of Redeemable Units and distributions of profits, if any.
For the nine months ended September 30, 2012, Partnership capital decreased 33.2% from $55,581,207 to $37,117,422. This decrease was attributable to a net loss of $11,204,614, coupled with the redemption of 8,319.8176 Redeemable Units totaling $10,579,171, which was partially offset by the subscriptions of 2,387.1956 Redeemable Units totaling $3,320,000. Future redemptions can impact the amount of funds available for investment in commodity contract positions in subsequent periods.
JWH Master’s capital consists of the capital contributions of its members increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, subscriptions and redemption of Units of Member Interest and distributions of profits if any.
For the nine months ended September 30, 2012, JWH Master’s capital decreased 28.8% from $55,600,671 to $39,596,890. This decrease was attributable to a net loss of $9,191,842, coupled with the redemption of 3,561.5262 Units of Member Interest totaling $9,963,352 and distribution of interest income to feeder funds totaling $14,562, which was partially offset by the subscriptions of 1,078.8132 Units of Member Interest totaling $3,165,975. Future redemptions can impact the amount of funds available for investment in commodity contract positions in subsequent periods.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 7 of the Financial Statements.
The Partnership and JWH Master record all investments at fair value in their financial statements, with changes in fair value reported as a component of net realized gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses and Changes in Partners’/Members’ Capital as applicable.
28
Table of Contents
Results of Operations
During the Partnership’s third quarter of 2012, the net asset value per unit decreased 6.9% from $1,297.63 to $1,208.05 as compared to an increase of 8.3% in the third quarter of 2011. The Partnership experienced a net trading loss before brokerage fees and related fees in the third quarter of 2012 of $2,069,925. Losses were primarily attributable to the Partnership’s and JWH Masters’ trading of commodity futures in currencies, energy, livestock, indices, Non-U.S. interest rates and softs and were partially offset by gains in grains, U.S. interest rates and metals. The Partnership experienced a net trading gain before brokerage fees and related fees in the third quarter of 2011 of $6,232,182. Gains were primarily attributable to the Partnership’s and JWH Masters’ trading of commodity futures in currencies, U.S. and non-U.S. interest rates, livestock and metals and were partially offset by losses in energy, grains, softs and indices.
The most significant losses were incurred within the energy markets during July from short futures positions in crude oil and its related products as prices advanced on concern that instability in the Middle East will disrupt energy supplies. During September, newly established long futures positions in crude oil and its related products resulted in further losses as prices declined amid an increase in supplies. Within the global stock index sector, losses were recorded during July from long positions in Japanese equity index futures as prices fell on negative corporate earnings expectations. Within the global interest rate sector, losses were experienced during August from long positions in U.S. and European fixed income futures as prices declined during the first half of the month amid positive economic data from the U.S. and speculation European policy makers will take steps to protect the region’s banks. Losses were also incurred within the currency markets during August from short positions in the euro and Swiss franc versus the U.S. dollar as the value of these European currencies advanced against the U.S. dollar after German Chancellor Angela Merkel reiterated her commitment to working with the European Central Bank to resolve the euro-zone’s financial turmoil. A portion of the Partnership’s losses during the quarter was offset by gains achieved within the agricultural complex during July from long positions in corn and soybean futures after prices rose as a heat wave and drought in the U.S. Midwest threatened to limit output. Within the metals markets, gains were recorded during September from long positions in gold futures as prices rose after stimulus measures from major central banks boosted its appeal as an inflation hedge.
During the Partnership’s nine months ended September 30, 2012, the net asset value per unit decreased 20.3% from $1,516.22 to $1,208.05 as compared to an increase of 0.1% during the nine months ended September 30, 2011. The Partnership experienced a net trading loss before brokerage fees and related fees for the nine months ended September 30, 2012 of $8,372,232. Losses were primarily attributable to the Partnership’s and JWH Masters’ trading of commodity futures in currencies, energy, U.S. interest rates, indices, livestock, metals and softs and were partially offset by gains in grains and non-U.S. interest rates. The Partnership experienced a net trading gain before brokerage fees and related fees for the nine months ended September 30, 2011 of $3,934,982. Gains were primarily attributable to the Partnership’s and JWH Masters’ trading of commodity futures in U.S. and non-U.S. interest rates, metals and softs and were partially offset by losses in currencies, energy, grains, livestock and indices.
29
Table of Contents
The most significant losses were recorded within the metals sector in January from short positions in gold and silver futures as prices advanced as the U.S. Federal Reserve’s pledge to keep U.S. borrowing costs low drove the U.S. dollar down, boosting demand for the precious metals. Additional losses were recorded in this sector during February and March from positions in gold and silver futures. Within the currency markets, losses were experienced during January from short positions in the euro, British pound, and Swiss franc versus the U.S. dollar as the value of these currencies moved higher against the U.S. dollar. Additional currency losses were incurred during June from short positions in the euro, British pound, and Swiss franc versus the U.S. dollar as the value of these European currencies increased against the U.S. dollar after European Union leaders eased terms on Spanish bank loans and moved towards resolving the region’s debt crisis. Within the energy complex, losses were recorded April from short positions in natural gas futures as prices moved higher on speculation that the lowest natural gas prices in a decade will prompt production cuts. During September, long futures positions in crude oil and its related products resulted in losses as prices declined amid an increase in supplies. Losses were also recorded within the global stock index markets during June from short positions in Japanese and European equity index futures as prices moved higher on optimism about the containment of the European debt crisis. Additional losses in this sector were incurred during July from long positions in Japanese equity index futures as prices fell on negative corporate earnings expectations. Within the agricultural sector, losses were incurred primarily during January and February from short positions in sugar futures as prices advanced on concern that supplies will be tighter than forecast because of harvest delays in Brazil, the world’s largest producer of sugar. Meanwhile, losses were also recorded in September from long positions in soybean and corn futures as prices fell on speculation that favorable weather in August limited crop damage caused by the severe drought in June and July in the U.S. A portion of the Partnership’s losses for the first nine months of the year was offset by gains experienced within the global interest rate sector during April and May from long positions in European, U.S., and Japanese fixed income futures as prices advanced after Standard & Poor’s cut Spain’s credit rating and Greece failed to form a unified government, adding to concern central banks and politicians are failing to contain the European debt crisis. Additional gains were achieved during July from long positions in U.S. and European fixed income futures as prices advanced on concern the global economic recovery is slowing.
Commodity markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility of profit. The profitability of the Partnership and JWH Master depends on the existence of major price trends and the ability of the Advisor to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events, and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Partnership expects to increase capital through operations.
30
Table of Contents
Interest income on 80% of the daily average equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of JWH Master’s) account was earned at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days. Interest income for the three months ended September 30, 2012 increased by $3,470, as compared to the corresponding period in 2011. The increase in interest income was primarily due to higher U.S. Treasury bill rates during the three months ended September 30, 2012, as compared to the corresponding period in 2011. Interest income for the nine months ended September 30, 2012 decreased by $2,994, as compared to the corresponding period in 2011. The decrease in interest income is due to lower average net assets during the nine months ended September 30, 2012, as compared to the corresponding period in 2011. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnership’s and JWH Masters’ accounts and upon interest rates over which neither the Partnership, JWH Master nor CGM has control.
Brokerage fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Brokerage fees and clearing fees for the three and nine months ended September 30, 2012 decreased by $297,443 and $804,213, respectively, as compared to the corresponding periods in 2011. The decrease in brokerage fees and clearing fees is due to lower average net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.
Management fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Management fees for the three and nine months ended September 30, 2012 decreased by $117,027 and $309,300, respectively, as compared to the corresponding periods in 2011. The decrease in management fees is due to lower average net assets during the three and nine months ended September 30, 2012, as compared to the corresponding periods in 2011.
Incentive fees are based on the new trading profits generated by the Advisor at the end of the quarter as defined in the advisory agreements among the Partnership, the General Partner and the Advisor. There were no incentive fees earned for the three and nine months ended September 30, 2012. Trading performance for the three and nine months ended September 30, 2011, resulted in incentive fees of $580 and $5,273, respectively.
In allocating the assets of the Partnership to the trading Advisor, the General Partner considers the Advisor’s past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the trading advisor and may allocate assets to additional advisors at any time.
As of September 30, 2012 and June 30, 2012, the Partnership’s assets were allocated among the JWH programs in the following approximate percentages:
September 30, 2012 | June 30, 2012 | |||||||
Broadly Diversified Programs | ||||||||
JWH Global Analytics | 86 | % | 86 | % | ||||
JWH Diversified Plus | 14 | % | 14 | % |
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Item | 3. Quantitative and Qualitative Disclosures about Market Risk |
The Partnership and JWH Master are speculative commodity pools. The market sensitive instruments held by them are acquired for speculative trading purposes, and all or substantially all of the Partnership’s and JWH Master’s assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s and JWH Master’s main line of business.
The limited partners will not be liable for losses exceeding the current net asset value of their investment.
Market movements result in frequent changes in the fair value of the Partnership’s and JWH Master’s open contracts and, consequently, in their earnings and cash balances. The Partnership’s and JWH Master’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 Partnership’s and JWH Master’s open contracts and the liquidity of the markets in which they trade.
The Partnership and JWH Master rapidly acquire and liquidate both long and short contracts in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s and JWH Master’s past performance is not necessarily indicative of their future results.
“Value at Risk” is a measure of the maximum amount which the Partnership and JWH Master could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s and JWH Master’s speculative trading and the recurrence in the markets traded by the Partnership and JWH Master of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership’s and JWH Master’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Partnership’s and JWH Master’s losses in any market sector will be limited to Value at Risk or by the Partnership’s and JWH Master’s attempts to manage their market risk.
Exchange maintenance margin requirements have been used by the Partnership and JWH Master as the measure of their Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to Value at Risk.
Value at Risk tables represent a probabilistic assessment of the risk of loss in market sensitive instruments. The first two tables indicate the trading Value at Risk associated with the Partnership’s and JWH Master’s open positions by market category as of September 30, 2012 and December 31, 2011. The remaining trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly (i.e., in the managed account in the Partnership’s name traded by JWH) and indirectly by JWH Master separately. There has been no material change in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2011.
The following tables indicate the trading Value at Risk associated with the Partnership’s open positions by market category as of September 30, 2012 and December 31, 2011. As of September 30, 2012, the Partnership’s total capitalization was $37,117,422.
September 30, 2012
Market Sector | Value at Risk | % of Total Capitalization | ||||||
Currencies | $ | 1,420,312 | 3.83 | % | ||||
Energy | 330,545 | 0.89 | % | |||||
Grains | 107,038 | 0.29 | % | |||||
Indices | 743,321 | 2.00 | % | |||||
Interest Rates U.S. | 621,508 | 1.67 | % | |||||
Interest Rates Non-U.S. | 902,374 | 2.43 | % | |||||
Livestock | 10,800 | 0.03 | % | |||||
Metals | 1,209,655 | 3.26 | % | |||||
Softs | 770,770 | 2.08 | % | |||||
|
|
|
| |||||
Total | $ | 6,116,323 | 16.48 | % | ||||
|
|
|
|
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As of December 31, 2011, the Partnership’s total capitalization was $55,581,207.
December 31, 2011
Market Sector | Value at Risk | % of Total Capitalization | ||||||
Currencies | $ | 1,483,475 | 2.67 | % | ||||
Energy | 941,508 | 1.69 | % | |||||
Grains | 128,473 | 0.23 | % | |||||
Indices | 203,699 | 0.37 | % | |||||
Interest Rates U.S. | 624,208 | 1.12 | % | |||||
Interest Rates Non-U.S. | 1,017,493 | 1.83 | % | |||||
Livestock | 138,860 | 0.25 | % | |||||
Metals | 2,499,722 | 4.50 | % | |||||
Softs | 1,220,468 | 2.20 | % | |||||
|
|
|
| |||||
Total | $ | 8,257,906 | 14.86 | % | ||||
|
|
|
|
The following tables indicate the trading Value at Risk associated with the Partnership’s direct investments and indirect investments through JWH Master by market category as of September 30, 2012, and December 31, 2011, and the highest, lowest and average values at any point during the three months ended September 30, 2012, and the twelve months ended December 31, 2011. All open contracts trading risk exposures have been included in calculating the figures set forth below.
As of September 30, 2012, the Partnership’s Value at Risk for the portion of its assets allocated to the Diversified Plus Program that are traded directly by the Advisor, was as follows:
September 30, 2012
Three months ended September 30, 2012 | ||||||||||||||||||||
Market Sector | Value at Risk | % of Total Capitalization | High Value at Risk | Low Value at Risk | Average Value at Risk* | |||||||||||||||
Currencies | $ | 82,000 | 0.22 | % | $ | 137,125 | $ | 82,000 | 106,500 | |||||||||||
Energy | 36,150 | 0.10 | % | 103,960 | 36,150 | 63,345 | ||||||||||||||
Grains | 49,750 | 0.13 | % | 53,000 | 45,250 | 49,333 | ||||||||||||||
Indices | 105,382 | 0.28 | % | 112,437 | 11,832 | 79,928 | ||||||||||||||
Interest Rates U.S. | 25,800 | 0.07 | % | 44,200 | 25,800 | 36,867 | ||||||||||||||
Interest Rates Non -U.S. | 43,528 | 0.12 | % | 92,695 | 29,149 | 63,790 | ||||||||||||||
Livestock | 10,800 | 0.03 | % | 13,200 | 8,400 | 9,600 | ||||||||||||||
Metals | 78,322 | 0.21 | % | 107,505 | 73,969 | 96,557 | ||||||||||||||
Softs | 26,200 | 0.07 | % | 40,100 | 25,000 | 34,267 | ||||||||||||||
|
|
|
| |||||||||||||||||
Totals | $ | 457,932 | 1.23 | % | ||||||||||||||||
|
|
|
|
* | Average of month-end Values at Risk. |
As of December 31, 2011, the Partnership’s Value at Risk for the portion of its assets allocated to the Diversified Plus Program that are traded directly by the Advisor was as follows:
December 31, 2011
Twelve months ended December 31, 2011 | ||||||||||||||||||||
Market Sector | Value at Risk | % of Total Capitalization | High Value at Risk | Low Value at Risk | Average Value at Risk* | |||||||||||||||
Currencies | $ | 219,500 | 0.39 | % | $ | 247,704 | $ | 40,200 | $ | 150,077 | ||||||||||
Energy | 105,475 | 0.19 | % | 168,805 | 63,360 | 106,813 | ||||||||||||||
Grains | 40,750 | 0.07 | % | 89,000 | 20,149 | 56,227 | ||||||||||||||
Indices | 94,428 | 0.17 | % | 188,613 | 35,559 | 125,231 | ||||||||||||||
Interest Rates U.S. | 54,060 | 0.10 | % | 73,300 | 7,749 | 47,078 | ||||||||||||||
Interest Rates Non -U.S. | 138,860 | 0.25 | % | 138,860 | 55,097 | 103,443 | ||||||||||||||
Livestock | 10,800 | 0.02 | % | 12,000 | 4,800 | 7,233 | ||||||||||||||
Metals | 138,151 | 0.25 | % | 138,239 | 28,494 | 100,337 | ||||||||||||||
Softs | 72,800 | 0.13 | % | 144,400 | 29,900 | 81,172 | ||||||||||||||
|
|
|
| |||||||||||||||||
Totals | $ | 874,824 | 1.57 | % | ||||||||||||||||
|
|
|
|
* | Annual average of month-end Values at Risk. |
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As of September 30, 2012, JWH Master’s total capitalization was $39,596,890. The Partnership owned approximately 86.8% of JWH Master. The JWH Master’s Value at Risk for its assets (including the portion of the Partnership’s assets that are traded indirectly) was as follows:
September 30, 2012
Three months ended September 30, 2012 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies | $ | 1,541,833 | 3.89 | % | $ | 2,426,283 | $ | 505,997 | $ | 1,018,075 | ||||||||||
Energy | 339,165 | 0.86 | % | 927,050 | 253,990 | 483,825 | ||||||||||||||
Grains | 66,000 | 0.17 | % | 617,000 | 66,000 | 428,000 | ||||||||||||||
Indices | 734,953 | 1.85 | % | 908,585 | 186,569 | 640,038 | ||||||||||||||
Interest Rates U.S. | 686,300 | 1.73 | % | 837,500 | 347,885 | 622,395 | ||||||||||||||
Interest Rates Non -U.S. | 989,454 | 2.50 | % | 1,586,005 | 276,932 | 1,042,609 | ||||||||||||||
Metals | 1,303,379 | 3.29 | % | 1,303,379 | 351,000 | 1,015,362 | ||||||||||||||
Softs | 857,800 | 2.17 | % | 857,800 | 85,000 | 681,200 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total | $ | 6,518,884 | 16.46 | % | ||||||||||||||||
|
|
|
|
* | Average of month-end Values at Risk. |
As of December 31, 2011, JWH Master’s total capitalization was $55,600,671. The Partnership owned approximately 88.7% of JWH Master. The JWH Master’s Value at Risk for its assets (including the portion of the Partnership’s assets that are traded indirectly) was as follows:
December 31, 2011
Twelve months ended December 31, 2011 | ||||||||||||||||||||
Market Sector | Value at Risk | % of Total Capitalization | High Value at Risk | Low Value at Risk | Average Value at Risk* | |||||||||||||||
Currencies | $ | 1,425,000 | 2.56 | % | $ | 1,616,400 | $ | 196,662 | $ | 978,654 | ||||||||||
Energy | 942,540 | 1.70 | % | 1,328,648 | 68,850 | 757,468 | ||||||||||||||
Grains | 98,899 | 0.18 | % | 1,186,000 | 98,899 | 629,229 | ||||||||||||||
Indices | 147,575 | 0.27 | % | 539,176 | 58,237 | 263,018 | ||||||||||||||
Interest Rates U.S. | 597,272 | 1.07 | % | 737,200 | 75,200 | 433,698 | ||||||||||||||
Interest Rates Non -U.S. | 1,086,170 | 1.95 | % | 1,528,594 | 321,976 | 955,659 | ||||||||||||||
Metals | 2,806,000 | 5.05 | % | 2,806,000 | 175,500 | 1,396,862 | ||||||||||||||
Softs | 1,220,200 | 2.19 | % | 1,971,480 | 97,200 | 1,147,613 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total | $ | 8,323,656 | 14.97 | % | ||||||||||||||||
|
|
|
|
* | Annual average of month-end Values at Risk. |
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Item 4. Controls and Procedures
The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to management, including the President and Chief Financial Officer (the “CFO”) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.
The General Partner is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.
The General Partner’s President and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2012, and, based on that evaluation, the General Partner’s President and CFO have concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.
The Partnership’sinternal control over financial reportingis a process under the supervision of the General Partner’s President and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. These controls include policies and procedures that:
• | pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; |
• | provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and (ii) the Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements. |
There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended September 30, 2012, that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
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The following information supplements and amends the discussion set forth under Part I, Item 3. “Legal Proceedings” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as updated by the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012.
This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which CGM or its subsidiaries is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.
CGM (together with Citigroup Inc. and its other subsidiaries, “Citigroup”) (formerly known as Salomon Smith Barney Inc.) is a New York corporation with its principal place of business at 388 Greenwich St., New York, New York 10013. CGM is registered as a broker-dealer and futures commission merchant (“FCM”), and provides futures brokerage and clearing services for institutional and retail participants in the futures markets. CGM and its affiliates also provide investment banking and other financial services for clients worldwide.
There have been no material administrative, civil or criminal actions within the past five years against CGM or any of its individual principals and no such actions are currently pending, except as follows.
RMBS Litigation and Other Matters
On May 4, 2012, the district court in FEDERAL HOUSING FINANCE AGENCY v. UBS AMERICAS, INC., ET AL., a parallel case to FEDERAL HOUSING FINANCE AGENCY v. ALLY FINANCIAL INC., ET AL., FEDERAL HOUSING FINANCE AGENCY v. CITIGROUP INC., ET AL., and FEDERAL HOUSING FINANCE AGENCY v. JPMORGAN CHASE & CO., ET AL., denied defendants’ motion to dismiss plaintiff’s securities law claims and granted defendants’ motion to dismiss plaintiff’s negligent misrepresentation claims. On June 19, 2012, the district court granted defendants’ motion to certify an interlocutory appeal to the United States Court of Appeals for the Second Circuit from the court’s statutes of repose and limitations rulings.
On May 15, 2012, Woori Bank filed a complaint in the United States District Court for the Southern District of New York against Citigroup alleging actionable misstatements and omissions in connection with Woori Bank’s $95 million investment in five collateralized debt obligations.
On May 18, 2012, the Federal Deposit Insurance Corporation filed (“FDIC”) complaints in the United States District Courts for the Southern District of New York and the Central District of California against various defendants, including Citigroup Global Markets Inc., Citicorp Mortgage Securities Inc., and CitiMortgage Inc., in connection with purchases of residential mortgage-backed securities (“RMBS”) by two failed banks for which the FDIC is acting as receiver.
On June 6, 2012, the court granted in part and denied in part defendants’ motions to dismiss in WESTERN & SOUTHERN LIFE INS. CO., ET AL. v. RESIDENTIAL FUNDING CO., LLC, ET AL.
On June 26, 2012, the court overruled defendants’ demurrer to plaintiff’s amended complaint in FEDERAL HOME LOAN BANK OF CHICAGO v. BANC OF AMERICA SECURITIES, LLC, ET AL.
On July 27, 2012, John Hancock Life Insurance Co. and several affiliated entities filed a complaint in the United States District Court for the District of Minnesota against various defendants, including CGM, asserting disclosure claims arising out of purchases of RMBS.
On August 29, 2012, the United States District Court for the Southern District of New York issued an order preliminarily approving the parties’ settlement in IN RE CITIGROUP INC. SECURITIES LITIGATION, pursuant to which Citigroup has agreed to pay $590 million. A fairness hearing is scheduled for January 15, 2013.
On August 30, 2012, Rentokil-Initial Pension Scheme filed a putative class action complaint against Citigroup on behalf of purchasers of 26 Citigroup offerings of medium term Euro Notes issued between October 12, 2005 and February 25, 2009. The complaint asserts claims under Section 90 of the Financial Services and Markets Act 2000 and includes allegations similar to those asserted in IN RE CITIGROUP INC. BOND LITIGATION.
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On October 15, 2012, the United States District Court for the Southern District of New York granted lead plaintiffs’ amended motion for class certification in NEW JERSEY CARPENTERS HEALTH FUND v. RESIDENTIAL CAPITAL LLC, ET AL., having previously denied lead plaintiffs’ motion for class certification on January 18, 2011. Plaintiffs in this action allege violations of Sections 11, 12, and 15 of the Securities Act of 1933, as amended, and assert disclosure claims on behalf of a putative class of purchasers of mortgage-backed securities issued by Residential Accredited Loans, Inc. pursuant or traceable to prospectus materials filed on March 3, 2006 and April 3, 2007. CGM is one of the underwriter defendants.
Other Matters
Citigroup and Citibank, N.A., along with other U.S. Dollar (USD) LIBOR panel banks, are defendants in the multidistrict litigation (MDL) proceeding before Judge Buchwald in the United States District Court for the Southern District of New York captioned IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION. Judge Buchwald has appointed interim lead class counsel for, and consolidated amended complaints have been filed on behalf of, three separate putative classes of plaintiffs: (1) OTC purchasers of derivative instruments tied to USD LIBOR; (2) purchasers of exchange-traded derivative instruments tied to USD LIBOR; and (3) indirect OTC purchasers of U.S. debt securities. Each of these putative classes alleges that the panel bank defendants conspired to suppress USD LIBOR in violation of the Sherman Act and/or the Commodity Exchange Act, thereby causing plaintiffs to suffer losses on the instruments they purchased. Also consolidated into the MDL proceeding are individual civil actions commenced by various Charles Schwab entities that allege that the panel bank defendants conspired to suppress the USD LIBOR rates in violation of the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act, and California state law, causing the Schwab entities to suffer losses on USD LIBOR-linked financial instruments that they owned. Plaintiffs in these actions seek compensatory damages and restitution for losses caused by the alleged violations, as well as treble damages under the Sherman Act. The Schwab and OTC plaintiffs also seek injunctive relief.
In the course of its business, CGM, as a major futures commission merchant and broker-dealer, is a party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of CGM. GCM may establish reserves from time to time in connections with such actions. Additional lawsuits containing claims similar to those described above may be filed in the future.
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There have been no material changes to the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and under Part II, Item 1A. “Risk Factors” in the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012, other than as set forth below.
Speculative position and trading limits may reduce profitability.
The CFTC and U.S. exchanges have established speculative position limits on the maximum net long or net short positions which any person may hold or control in particular futures and options on futures. The trading instructions of an advisor may have to be modified, and positions held by the Partnership may have to be liquidated in order to avoid exceeding these limits. Such modification or liquidation could adversely affect the operations and profitability of the Partnership by increasing transaction costs to liquidate positions and foregoing potential profits.
In October 2011, the CFTC adopted new rules governing position limits. In September 2012, these rules were vacated by the United States District Court for the District of Columbia and remanded to the CFTC for further consideration. It is possible, nevertheless, that these rules may take effect in some form via re-promulgation or a successful appeal by the CFTC of the District Court’s ruling. The vacated rules established position limits on certain futures contracts and any economically equivalent futures, options and swaps.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
For the three months ended September 30, 2012, there were subscriptions of 269.3739 Redeemable Units totaling $350,000. The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and Section 506 of Regulation D promulgated thereunder. These Redeemable Units were purchased by accredited investors as described in Regulation D. In determining the applicability of the exemption, the General Partner relied on the fact that the Redeemable Units were purchased by accredited investors in a private offering.
Proceeds from the sale of additional Redeemable Units are used in the trading of commodity interests including futures contracts, forwards and commodity option contracts, and any other rights or interests pertaining thereto including interest in commodity pools.
The following chart sets forth the purchases of Redeemable Units by the Partnership.
Period | (a) Total Number of Shares (or Units) Purchased* | (b) Average Price Paid per Share (or Unit)** | (c) Total Number of Shares Purchased as Part of Publicly Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
July 1, 2012-July 31, 2012 | 259.2940 | $ | 1,363.73 | N/A | N/A | |||||||||||
August 1, 2012-August 31, 2012 | 502.7290 | $ | 1,288.31 | N/A | N/A | |||||||||||
September 1, 2012-September 30, 2012 | 2,146.0740 | $ | 1,208.05 | N/A | N/A | |||||||||||
Total | 2,908.0970 | $ | 1,235.81 |
* | Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date, the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for limited partners. |
** | Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day. |
Item 3. Defaults Upon Senior Securities – None
Item 4. Mine Safety Disclosures – None
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The registrant does not have a board of directors. The General Partner is managed by a board of directors.
Effective November 14, 2012, Mr. Damian George was appointed a director of the General Partner.
Damian George, age 45, has been a Director of the General Partner since November 2012. Since June 2012, Mr. George has been the Chief Financial Officer and a principal of the General Partner and is an associate member of the National Futures Association. Since August 2009, Mr. George has been employed by Morgan Stanley Smith Barney LLC, a financial services firm, where his responsibilities include oversight of budgeting, finance and Sarbanes-Oxley testing for the Alternative Investments—Managed Futures group. Since August 2009, Mr. George has been registered as an associated person of Morgan Stanley Smith Barney LLC. From November 2005 through July 2009, Mr. George was employed by Citi Alternative Investments, a division of Citigroup Inc. (“Citigroup”), a financial services firm, which administered Citigroup’s hedge fund and fund of funds business, where he served as Director and was responsible for budgeting, finance and Sarbanes-Oxley testing for the Hedge Fund Management group. From November 2004 through July 2009, Mr. George was registered as an associated person of CGM. Mr. George earned his Bachelor of Science degree in Accounting in May 1989 from Fordham University and his Master of Business Administration degree in International Finance in February 1998 from Fordham University. Mr. George is a Certified Public Accountant.
The Partnership intends to fully redeem its investment in JWH Master on November 30, 2012.
In addition, effective December 1, 2012 (the “Effective Date”), the Advisor will no longer be responsible for trading decisions made for the Partnership or allocated a portion of the Partnership’s assets to manage. The Advisor will be replaced with Rabar Market Research, Inc. (“Rabar”) as the sole trading advisor to the Partnership. It is anticipated that on or about the Effective Date, the Partnership’s assets will be traded pursuant to Rabar’s Diversified Program. In addition, on or about the Effective Date, the Partnership will change its name to Westport Futures Fund L.P. Limited partners have been given the option to redeem their investments in the Partnership prior to the Effective Date.
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3.1 | Limited Partnership Agreement, dated March 21, 1997 (filed as Exhibit A to the Registration Statement on Form S-1 filed on April 10, 1997 and incorporated herein by reference). |
3.2 | Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of New York, dated March 21, 1997 (filed as Exhibit 3.2 to the Registration Statement on Form S-1 filed on April 10, 1997 and incorporated herein by reference). |
(a) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated October 1, 1999 (filed as Exhibit 3.2(a) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
(b) | Certificate of Change of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, effective January 31, 2000 (filed as Exhibit 3.2(b) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
(c) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated May 21, 2003 (filed as Exhibit 3.2(c) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
(d) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 21, 2005 (filed as Exhibit 3.2(d) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
(e) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.2(e) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
(f) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 28, 2009 (filed as Exhibit 99.1 to the Form 8-K filed on September 29, 2009 and incorporated herein by reference). |
(g) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated June 29, 2010 (filed as Exhibit 3.2(g) to the Form 8-K filed on July 2, 2010 and incorporated herein by reference). |
(h) | Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 2, 2011 (filed as Exhibit 3.2(h) to the Form 8-K filed on September 7, 2011 and incorporated herein by reference). |
10.1 | Form of Customer Agreement between the Partnership and Smith Barney Inc. (filed as Exhibit 10.1 to the Registration Statement on Form S-1 filed on April 10, 1997 and incorporated herein by reference). |
(a) | Amendment No. 1 to the Customer Agreement, dated March 1, 2000 (filed as Exhibit 10.1(a) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
10.2 | Form of Escrow Agreement and Instructions relating to escrow of subscription funds (filed as Exhibit 10.3 to the Registration Statement on Form S-1 filed on April 10, 1997 and incorporated herein by reference). |
(a) | Amendment to the Escrow Agreement and Instructions relating to escrow of subscription funds, dated April 8, 1997 (filed as Exhibit 10.2(a) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
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10.3 (a) | Amended and Restated Management Agreement among the Partnership, the General Partner and John W. Henry & Company Inc., dated March 1, 2000 (filed as Exhibit 10.3 to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
(b) | Amendment No. 1 to the Amended and Restated Management Agreement, dated September 10, 2000 (filed as Exhibit 10.3(a) to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
(c) | Letter extending the Amended and Restated Management Agreement among the Partnership, the General Partner and John W. Henry & Company, Inc. for 2011, dated June 1, 2011 (filed as Exhibit 10.3(b) to the Form 10-K filed on March 30, 2012 and incorporated herein by reference). |
10.4 | Form of Subscription Agreement (filed as Exhibit 10.4 to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
10.5 | Agency Agreement among the Partnership, the General Partner, Morgan Stanley Smith Barney LLC and Citigroup Global Markets Inc., dated November 11, 2009 (filed as Exhibit 10.5 to the Form 10-Q filed on November 16, 2009 and incorporated herein by reference). |
10.6 | Joinder Agreement among the General Partner, Citigroup Global Markets Inc., and Morgan Stanley Smith Barney LLC dated as of June 1, 2009 (filed as Exhibit 10 to the Form 10-Q filed on August 14, 2009 and incorporated herein by reference). |
The exhibits required to be filed by Item 601 of regulation S-K are incorporated herein by reference
31.1 – Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director)
31.2 – Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer and Director)
32.1 – Section 1350 Certification (Certification of President and Director)
32.2 – Section 1350 Certification (Certification of Chief Financial Officer and Director)
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WESTPORT JWH FUTURES FUND L.P.
By: | Ceres Managed Futures LLC | |
(General Partner) |
By: | /s/ Walter Davis | |
Walter Davis | ||
President and Director |
Date: November 14, 2012
By: | /s/ Damian George | |
Damian George | ||
Chief Financial Officer and Director (Principal Accounting Officer) |
Date: November 14, 2012
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