UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2012
or
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
_______________________
Commission file number: 000-53815
ALTEGRIS QIM FUTURES FUND, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE (State or other jurisdiction of incorporation or organization) | | 27-0473854 (I.R.S. Employer Identification No.) |
c/o ALTEGRIS PORTFOLIO MANAGEMENT, INC.
1202 Bergen Parkway, Suite 212
Evergreen, Colorado 80439
(Address of principal executive offices) (zip code)
(858) 459-7040
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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.
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).
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer and large accelerated filer,” “accelerated filed” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [ ] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
Not Applicable.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
ITEM 1: BUSINESS
(a) General Development of Business
Altegris QIM Futures Fund, L.P. (the “Partnership”) was organized as a Delaware limited partnership in June 2009 and commenced operations following an initial closing on October 1, 2009. The Partnership is a commodity pool engaged in speculative trading across a broad range of futures contracts and currencies. The Partnership may in the future trade options on futures contracts and forward contracts (together with futures contracts and currencies, “Commodity Interests”). Under the Partnership’s Agreement of Limited Partnership (the “Limited Partnership Agreement”), Altegris Portfolio Management, Inc. (d/b/a Altegris Funds), an Arkansas corporation (“Altegris Funds” or the “General Partner”), serves as general partner of the Partnership and has sole responsibility for management and administration of all aspects of the Partnership’s business. Investors purchasing limited partnership interests (the “Interests”) in the Partnership (“Limited Partners” and together with the General Partner, “Partners”) have no rights to participate in the management of the Partnership.
Altegris Funds is registered with the Commodity Futures Trading Commission (“CFTC”) as a Commodity Pool Operator (“CPO”), and is a member of National Futures Association (“NFA”). Quantitative Investment Management LLC, a Virginia limited liability company formed in May 2003, acts as the Partnership’s trading advisor (“QIM” or the “Advisor”). QIM became registered as a Commodity Trading Advisor (“CTA”) in 2004 and a CPO in 2005 and is a member of NFA. Effective as of December 31, 2010, Altegris Funds became a wholly-owned subsidiary of Genworth Financial, Inc. (“Genworth”). Genworth became a principal of Altegris Funds and Altegris Futures, L.L.C. (“Altegris Futures”), an affiliate of the General Partner, in January 2011. On October 1, 2012, Genworth undertook an internal reorganization whereby Genworth contributed all of the outstanding capital stock of Altegris Funds and Altegris Futures to Altegris Holdings, Inc. (“Altegris Holdings”), a newly-formed indirect holding company subsidiary of Genworth, and contributed all of the outstanding capital stock of Altegris Holdings, Inc. to AssetMark Holdings, Inc. (“AssetMark”), a newly-formed direct subsidiary of Genworth. Altegris Holdings and AssetMark each became principals of Altegris Funds and Altegris Futures on October 1, 2012.
Altegris Investments, Inc. (“Altegris”), an affiliate of the General Partner, serves as a selling agent of the Interests and acted as the Partnership’s introducing broker until January 1, 2011, when Altegris Futures replaced Altegris as the Partnership’s introducing broker (“Introducing Broker”). Altegris Futures is registered with the CFTC as an Introducing Broker.
The Partnership’s term will end upon the first to occur of the following: receipt by the General Partner of an election to dissolve the Partnership at a specified time by Limited Partners owning more than 50% of the Interests then outstanding, notice of which is sent by registered mail to the General Partner not less than ninety (90) days prior to the effective date of such dissolution; withdrawal, admitted or court decreed insolvency or dissolution of the General Partner unless at such time there is at least one remaining General Partner in the Partnership; or any event that makes it unlawful for the existence of the Partnership to be continued or requiring termination of the Partnership.
The Partnership is not required to be, and is not, registered under the Investment Company Act of 1940, as amended.
As of February 28, 2013, the aggregate net asset value of the Interests in the Partnership before redemptions was $131,791,155. The Partnership operates on a calendar fiscal year and has no subsidiaries.
The Partnership offers three “classes” of Interests: Class A, Class B and Institutional Interests (each, a “Class of Interest”). The Classes of Interests differ from each other only in the fees that they pay and the applicable investment minimums.
(b) Financial Information About Segments
The Partnership’s business constitutes only one segment for financial reporting purposes — i.e., a speculative “commodity pool.” The Partnership does not engage in sales of goods or services. Financial information regarding the Partnership’s business is set forth in the Partnership’s financial statements, included herewith.
(c) Narrative Description of Business
The Partnership’s objective is to produce long-term capital appreciation through growth, and not current income.
Predictive Modeling. QIM believes that financial markets are not entirely efficient and that numerous small inefficiencies exist and can be exploited through the prudent use of robust analysis and predictive technologies.
QIM currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation.
QIM’s trading strategies and models may be revised from time to time as a result of ongoing research and development seeking to devise new strategies and systems as well as to improve current methods. The strategies and systems used by QIM in the future may differ significantly from those currently in use due to changes resulting from this research, and Limited Partners will not be informed of these changes as they may occur.
Risk Management. QIM applies risk management procedures that take into account the price, size, volatility, liquidity, and inter-relationships of the contracts traded. The Partnership’s positions are generally balanced in a manner that allocates approximately equal amounts of measured risk to as many distinct markets as possible and during significant drawdowns in equity, QIM will reduce market exposure by scaling back the Partnership’s overall leverage.
Trading. QIM’s trading is generally approximately 95% systematic and 5% discretionary. All facets of the predictive models, risk management, and trade allocation are fully automated or proceduralized. In this sense, the trading is systematic. Discretion of QIM, however, plays a significant role in the pursuit of improvements to the Program.
QIM has different time horizons for the execution of certain trades. For example, QIM may have certain trades executed at the beginning of the trading day while giving the executing broker limited discretion with respect to other trades.
Markets Traded. QIM currently trades or monitors over 50 tradable markets in currencies, stock indices, interest rates, energy, grains, softs and metals. QIM may add or delete markets from this universe of tradable markets in its discretion if QIM’s research demonstrates that such an addition or deletion would enhance the program’s performance. All markets are futures markets or interbank currency markets.
QIM seeks to profitably trade each of these markets while taking advantage of the diversification available from such a varied universe of futures contracts. QIM’s trading program often takes opposing long and short positions within the same or related classes of correlated futures, which, taken in conjunction with the effect of diversification across a broad range of contracts, generally results in reduced market exposure than trading a single market with similar leverage.
A substantial portion of the equity in the Partnership’s account is invested in United States (“U.S.”) government and agency securities and other liquid, high-quality instruments at the direction of the Custodian (as defined below). QIM will generally maintain an average margin to equity level of between 0% and 20%. The actual percentage of assets committed to margin at any time may be higher or lower than the target level.
It is expected that between 5% and 20% of the Partnership’s assets generally will be held as initial margin or option premiums (in cash or U.S. Treasury Department (“Treasury”) securities) in the Partnership’s brokerage accounts at its clearing broker, J.P. Morgan Securities LLC (“J.P. Morgan Securities”), a futures commission merchant (“FCM”),
and available for trading by QIM in Commodity Interests on behalf of the Partnership. Interest on Partnership assets held at J.P. Morgan Securities in cash or Treasury securities will be credited to the Partnership as described under “Charges.” Depending on market factors, the amount of margin or option premiums held at J.P. Morgan Securities could change significantly, and all of the Partnership’s assets are available for use as margin. The Partnership may also retain other brokers and/or dealers from time to time to clear or execute a portion of Partnership trades made by QIM.
With respect to Partnership assets not held at J.P. Morgan Securities as described above, but deposited with JPMorgan Chase Bank, N.A. (the “Custodian”), the portion not held in checking, money market or other bank accounts (and used to pay Partnership operating expenses) will be invested in liquid, high-quality short-term securities at the direction of the Custodian or its affiliate J.P. Morgan Investment Management Inc. (“JPMIM”). The Partnership’s custody and investment management agreement with the Custodian permits the Custodian to invest in U.S. government and agency securities, other securities or instruments guaranteed by the U.S. government or its agencies, CDs, time deposits, banker’s acceptances and commercial paper — subject in each case to specific diversification, credit quality and maturity limitations. The Custodian may use sub-advisers to attempt to increase yield enhancement. The General Partner may direct that a portion of Partnership assets be deposited with other custodians and retain other sub-advisers for the purpose of attempting to increase yield enhancement via other cash management arrangements.
The percentage of the Partnership’s assets deposited with these firms is also subject to change in the General Partner’s sole discretion. The Partnership’s assets will not be commingled with the assets of any other person. Depositing the Partnership’s assets with banks or J.P. Morgan Securities, or other clearing brokers, as segregated funds is not commingling for these purposes.
The Partnership pays all of its ongoing liabilities, expenses and costs. Altegris Funds receives a management fee of 0.104% of the prior month ending net asset value, before deduction for any accrued incentive fees related to the current quarter (the “management fee net asset value”), of all Class A Interests (1.25% per annum), 0.104% of the month-end management fee net asset value of all Class B Interests (1.25% per annum) and 0.0625% of the prior month-end management fee net asset value of all Institutional Interests (0.75% per annum). QIM receives a 30% of quarterly trading profits applicable to each Class of Interest.
Each selling agent selling Class A Interests receives 0.166% of the month-end net asset value of the Partnership apportioned to each Class A Interest sold by such selling agent (2% per annum) and may elect to receive 0.0417% of the month-end net asset value apportioned to any Institutional Interest sold by such selling (0.50% per annum).
The Partnership’s clearing broker paid during 2012 and will pay from and after January 1, 2013 to Altegris Futures a portion of the brokerage commissions and transaction fees received from the Partnership as well as a portion of the interest income received on the Partnership’s assets. Monthly brokerage charges equal to the greater of (A) actual commissions of $9.75 per round-turn (higher for certain exchanges or commodities) multiplied by number of round-turn trades, which amount includes other transaction costs; or (B) an amount equal to 0.125% of the management fee net asset value of all Interest holders’ month-end capital account balances (1.50% annually). If actual monthly commissions and transaction costs in (A) above are less than the amount in (B) above, the Partnership will pay the difference to the Introducing Broker as payment for brokerage-related services. In any month when the amount in (A) is greater than the amount in (B) above, the Partnership pays only the amount described in (A) above. Newedge USA, LLC (“Newedge”) served as the clearing broker for the Partnership until August 2012, at which point J.P. Morgan Securities became the clearing broker for the Partnership. Newedge continues to serve as a reserve clearing broker for the Partnership.
The Partnership generally pays its operating expenses as they are incurred. However, during the first twelve months after the Partnership commenced trading, the General Partner agreed to limit the operating expenses paid by the Partnership to 1/12th of 0.5% of the month-end capital account balances of all Interests for such month. A fixed administrative fee is charged to Class A and Class B Interests and paid to Altegris Funds equal to 0.0275% of the management fee net asset value of the month-end capital account balance of all such Class A and Class B Interests (0.333% per annum).
(d) Regulation
The CFTC has delegated to NFA responsibility for the registration of “commodity trading advisors,” “commodity pool operators,” “futures commission merchants,” “introducing brokers,” “swap dealers”, “major swap participants” and, in most cases, their respective associated persons, as well as “floor brokers” and “floor traders.” The Commodity Exchange Act requires commodity pool operators such as Altegris Funds, commodity trading advisors such as the Advisor and commodity brokers or FCMs such as J.P. Morgan Securities and introducing brokers such as Altegris Futures to be registered and to comply with various reporting and record keeping requirements. CFTC regulations also require FCMs and certain introducing brokers to maintain a minimum level of net capital. In addition, the CFTC and certain commodities exchanges have established limits referred to as “speculative position limits” on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges. Similar position limits may in the future be put in place with respect to swaps that are exchange-traded or are economically equivalent to exchange-traded swaps or futures contracts. All accounts owned or managed by the Advisor will be combined for position limit purposes. The Advisor could be required to liquidate positions held for the Partnership in order to comply with such limits. Any such liquidation could result in substantial costs to the Partnership. In addition, many futures exchanges impose limits beyond which the price of a futures contract may not trade during the course of a trading day, and there is a potential for a futures contract to hit its daily price limit for several days in a row, making it impossible for the Advisor to liquidate a position and thereby experiencing a dramatic loss. Certain deliverable currency forward contracts are subject to limited regulation in the United States, including reporting and recordkeeping requirements.
In addition to the registration requirements described above, the CFTC and certain commodity exchanges have established limits on the maximum net long or net short position which any person may hold or control in particular commodities. Most exchanges also limit the changes in futures contract prices that may occur during a single trading day. The CFTC may in the future also implement position limits for certain exempt commodity contracts, including metals and energy contracts, with respect to futures, options on futures, and economically equivalent swaps. Position limits in spot months are proposed to be 25% of the official estimated deliverable supply of the underlying commodity and in a non-spot month a percentage of the average aggregate 12-month rolling open interest in all months (swaps and futures) for each contract. If such position limits are adopted, they could materially affect the Partnership’s trading strategy.
Deliverable currency forward contracts are currently subject to only limited regulation in the United States. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was enacted in July 2010. The Reform Act includes provisions that comprehensively regulate the over-the-counter derivatives markets for the first time. The Reform Act mandates that a substantial portion of over-the-counter derivatives must be executed in regulated markets and submitted for clearing to regulated clearinghouses. The mandates imposed by the Reform Act may result in the Partnership bearing higher upfront and mark-to-market margin, less favorable trade pricing, and the possible imposition of new or increased fees with respect to any swaps entered into by the Partnership.
The Partnership has no employees.
Financial Information About Geographic Areas
The Partnership has no operations in foreign countries although it trades on foreign exchanges and other non-U.S. markets. The Partnership does not engage in sales of goods or services.
ITEM 1A: RISK FACTORS
Not required.
ITEM 1B: UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2: PROPERTIES
The Partnership does not own or use any physical properties in the conduct of its business. Employees of affiliates of Altegris Funds, perform all administrative services for the Partnership from offices at 1202 Bergen Parkway, Suite 212, Evergreen, Colorado 80439 or at 1200 Prospect St., Suite 400, La Jolla, California 92037.
ITEM 3: LEGAL PROCEEDINGS
The Partnership is not aware of any pending legal proceedings to which either the Partnership is a party or to which any of its assets are subject. The Partnership is not aware of any material legal proceedings involving Altegris Funds or its principals in an adverse position to the Partnership or in which the Partnership has adverse interests. The Partnership has no subsidiaries.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
There is no trading market for the Interests, and none is likely to develop. Interests may be redeemed or transferred subject to the conditions imposed by the Limited Partnership Agreement.
As of February 28, 2013 the Partnership had 1,777 holders of Interests.
Altegris Funds has sole discretion in determining what distributions, if any, the Partnership will make to its investors. To date no distributions or dividends have been paid on the Interests, and Altegris Funds has no present intention to make any.
| (d) | Securities Authorized for Issuance under Equity Compensation Plans |
None.
| (e) | Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities |
The Partnership did not sell any unregistered securities within the past three years which have not previously been included in the Partnership’s Quarterly Reports on Form 10-Q or in a Current Report on Form 8-K.
| (f) | Issuer Purchases of Equity Securities |
Pursuant to the Limited Partnership Agreement, Limited Partners may redeem their Interests in the Partnership as of the end of any calendar month upon fifteen (15) days’ written notice to the General Partner. The redemption of capital from capital accounts by Limited Partners has no impact on the value of the capital accounts of other Limited Partners.
The following table summarizes Limited Partner redemptions during the fourth calendar quarter of 2012:
| Month Ended | | | Amount Redeemed | |
| | | | |
| October 31, 2012 | | $ | 3,616,293 | |
| November 30, 2012 | | | 1,135,223 | |
| December 31, 2012 | | | 2,256,262 | |
| Total | | $ | 7,007,778 | |
ITEM 6: SELECTED FINANCIAL DATA
Not required.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to “Item 8. Financial Statements and Supplementary Data.” The information contained therein is essential to, and should be read in conjunction with, the following analysis.
The Partnership’s assets are generally held as cash or cash equivalents, which are used to margin the Partnership’s futures positions and are sold to pay redemptions and expenses as needed. Other than any potential market-imposed limitations on liquidity, the Partnership’s assets are highly liquid and are expected to remain so. Market-imposed limitations, when they occur, can be due to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Partnership’s futures trading. A portion of the Partnership’s assets not used for margin and held with the Custodian are invested in liquid, high quality securities. Through December 31, 2012 the Partnership experienced no meaningful periods of illiquidity in any of the markets traded by the Advisor on behalf of the Partnership.
The Partnership raises additional capital only through the sale of Interests and capital is increased through trading profits (if any) and interest income. The Partnership does not engage in borrowing.
The amount of capital raised for the Partnership should not have a significant impact on its operations, as the Partnership has no significant capital expenditure or working capital requirements other than for capital to pay trading losses, brokerage commissions and expenses. Within broad ranges of capitalization, the Partnership’s trading positions should increase or decrease in approximate proportion to the size of the Partnership.
The Partnership participates in the speculative trading of commodity futures contracts and may trade options on futures contracts and forward contracts, substantially all of which are subject to margin requirements. The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges. Further, the Partnership’s FCMs and brokers may require margin in excess of minimum exchange requirements.
All of the futures contracts currently traded by the Advisor on behalf of the Partnership are exchange-traded. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions because, in over-the-counter transactions, the Partnership must rely solely on the credit of its trading counterparties, whereas exchange-traded contracts are generally, but not universally, backed by the collective credit of the members of the exchange. In the future, the Partnership anticipates that it will enter into non-exchange-traded foreign currency contracts and be subject to the credit risk associated with counterparty non-performance.
The Partnership bears the risk of financial failure by J.P. Morgan Securities and/or other clearing brokers or counterparties with which the Partnership trades.
Performance Summary
The Partnership’s success depends primarily upon QIM’s ability to recognize and capitalize on market trends in the sectors of the global commodity futures markets in which it trades. The Partnership seeks to produce long-term capital appreciation through growth, and not current income. The past performance of the Partnership is not necessarily indicative of future results.
2012
During 2012, the Partnership achieved net realized and unrealized gains of $9,028,017 from all trading; gains of $8,912,060 from trading of futures contracts including brokerage commissions of $1,916,974. The Partnership accrued total expenses of $7,804,749, including $4,320,095 in incentive fees, $1,454,056 in management fees paid to the General Partner, and $1,503,361 in service and professional fees. The Partnership earned $146,654 in interest income during 2012. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for each quarter during 2012 is set forth below.
Fourth Quarter 2012. The Partnership experienced a loss in October 2012 as losses in interest rates eclipsed modest gains in European equities, currencies, and energies. The month started strong, with long equities and encouraging U.S. economic data delivering positive returns. Performance eventually sagged, however, as long U.S. Treasury and European bond positions contravened market trends. The Partnership experienced a loss in November 2012 as performance was dominated by positions in futures contracts on the S&P 500. Long equity signals failed to anticipate heavy losses after the U.S. presidential election. These losses worsened when equity signals switched to short the following week just prior to an unexpected surge in these same markets. The Partnership achieved modest gains throughout the month in its trading of futures contracts on European bonds and the Japanese Yen, but not enough to offset losses elsewhere in the portfolio. The Partnership achieved gains in December 2012 primarily through profitable positioning in futures contracts on interest rates and stock indices on high volatility during the month. Long positions in futures contracts on U.S. and European equities, and short positions on U.S. Treasuries capitalized on a generally upward trend in stock markets during the first half of the month. The second half of the month saw stock markets turn downward; however, by this time the Partnership’s futures contracts on U.S equities positions had switched to short through the remainder of the month. Performance during the month was also driven by gains on a long position in futures contracts on the Eurobund, as well as profits in currency futures trading.
Third Quarter 2012. The Partnership experienced a loss in July 2012 as poor employment numbers in the U.S. and continued concern about the fiscal health of Spain and Italy caused the equity markets to slide and treasury prices to rise, both working against the Partnership’s positions. The Eurobund accounted for over half of the losses for the month. The Partnership also struggled in the stock index sector, with futures contracts on the S&P being the worst performer. Short positions in Crude Oil also hurt performance as prices spiked during the month. Short positions in most of the foreign currencies contributed positively with a short Euro position being the best performer. The Partnership finished August 2012 with a slight gain. Long stock index futures positions drove performance during the month. The month began negatively for stocks and treasuries, but the outlook changed with an unexpectedly positive U.S. employment report. Interest rates generated significant losses for the month, with a short Eurobund position in the second half of the month being the biggest loser. Crude oil prices rose steadily, contravening our mostly month-long short position. Currencies additionally dragged down returns as long positions in the Australian Dollar and Euro yielded losses. The Partnership ended September relatively flat with equity positions having delivered the bulk of the gains, offset by losses in interest rate positions. Other notable contributors were profitable positions in futures contracts on energies, particularly Crude Oil, as well as lucrative positions in Gold and Copper. Interest rate futures and currency futures hurt performance considerably.
Second Quarter 2012. The Partnership achieved a gain in April 2012. The Partnership held long positions for the entire month in interest rate futures contracts, as poor March U.S. employment data and Spain’s downgrade by S&P drove interest rate futures higher. The Partnership started the month short futures contracts on stock indices and reversed to a long position after the S&P declined five consecutive days. The Partnership stayed with that long position for the rest of the month as the S&P was able to recover most of its losses from earlier in the month. Trading in currency, metal, energy and agricultural sectors all produced losses, but the Partnership’s exposure in these sectors was less significant. The Partnership achieved a gain in May 2012, as poor U.S. employment data in the beginning of the month started equities on a downward slide. The Partnership’s short positions in futures contracts on stock indices were well positioned to profit during the decline. The Partnership also benefitted from its long positions in the 10-year note and 30-year bond throughout the month. The most significant contributions to performance during the month came from trading in futures contracts on stock indices, interest rates and currencies. The Partnership achieved a gain in June 2012 based largely on long futures contracts on stock indices. Equity markets rallied on the release of strong U.S. economic data. Futures contracts on crude oil led the Partnership’s energy sector trading. Trading in futures contracts on currencies was the worst performing sector during the month as the dollar struggled during the first three weeks of the month, while the Partnership held short positions.
First Quarter 2012. The Partnership experienced a loss in January 2012, with losses highly concentrated in the interest rate sector. Positions in futures contracts on US Treasuries were the worst performing during the month, however, the Partnership also struggled with positions in futures contracts on the Euro currency, Euro-Bund and Dax. The Partnership earned gains in its trading of futures contracts on US equity indices, but it was not enough to offset losses elsewhere in the portfolio. The Partnership experienced a loss in February 2012 on poor trading in interest rate futures for the second consecutive month. Energy trading buoyed the month’s performance with futures contracts on crude oil and brent crude representing the month’s two best performing contracts as the Partnership took advantage of the long rally in oil prices. The Partnership achieved a gain in March 2012. During the first half of March, the positive economic data in the US drove interest rate futures down at a time when the Partnership was heavily short that sector. Subdued data from China, Europe and the US housing market also contributed to the rally in interest rate futures for the remainder of the month. While the Partnership lightened its exposure to US interest rates, positions in the European rates lead to losses in those markets. The Partnership profited from its trading of futures contracts on the short side of the Yen and on the long side of E-mini S&P contracts during the month.
2011
During 2011, the Partnership achieved net realized and unrealized gains of $4,717,099 from all trading; gains of $4,619,805 from trading of futures contracts including brokerage commissions of $1,941,056. The Partnership accrued total expenses of $4,578,825, including $969,544 in incentive fees, $1,462,413 in management fees paid to the General Partner, and $1,482,904 in service and professional fees. The Partnership earned $266,259 in interest income during 2011. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for each quarter during 2011 is set forth below.
Fourth Quarter 2011. The Partnership achieved a gain in October 2011 as the program continued to benefit from turbulence in stock index and interest rate futures. Equity markets rebounded strongly from their five-month free fall; however, markets began to sell off again at month-end. The Partnership profitably traded Euro-Bund futures contracts and took advantage of rising interest rates on the long end of the US yield curve. Trading in Euro futures continued to be strong as the currency gained in conjunction with renewed investor confidence. Crude oil futures also played a positive role in the month’s final tally. The Partnership achieved a gain in November 2011 booking large gains on the first and last day of the month, and was profitable on five of the last six trading days of November. On the first of the month, when the program was largely short stock index futures and long interest rates, the Greek government called for a referendum on the latest bailout package causing the markets to fall and interest rate futures to rally sharply, producing large gains. Euro-Bund and Dax futures were the most profitable contracts during the month, as the Partnership took advantage of continued volatility in Europe. The Partnership experienced a loss in October 2011. Trading in futures contracts on US Treasury notes and bonds proved challenging as news continued to fuel uncertainty regarding the European monetary union. The Partnership also lost money in futures contracts on the Nasdaq and S&P 500. Euro currency and Euro-Bund trading were among the Partnership’s most lucrative contracts. The program held short positions in gold futures for all but the last day of the month, during which time the price of gold contracts dropped significantly.
Third Quarter 2011. Performance in July was positive as trading in interest rate futures showed solid gains. Performance was boosted by gold and silver trading as the gold markets reached an all-time high. The end of the month saw global markets falter and the Partnership’s short stock index positions and long interest rate positions, generated gains for the month. August saw mixed performance for the Partnership as world equity markets, which had fallen significantly in the last week of July, fell even more rapidly in the first week of August. The Partnership began the month with gains primarily from its positions in US and European stock index futures, but concerns regarding the European debt crisis and the downgrade of US Government debt drove markets significantly lower. Performance was driven by positions in equity markets - both short and long. The Partnership achieved gains in trading gold futures amid a choppy market for the commodity. The partnership achieved a gain in September 2011 as markets continued to be driven by speculation regarding the sovereign debt crises throughout the euro zone. The Partnership was well-positioned to take advantage of high volatility by holding short positions in global equity markets and long positions in global interest rate futures to start the month. The Partnership profited by reversing its positions as the markets rallied during the second week of the month.
Second Quarter 2011. The Partnership experienced a loss in April 2011, as news of the severity of the Japanese nuclear crisis hurt long positions the Partnership held in futures contracts on global equities, the U.S. dollar and crude oil. The Partnership also held short positions in futures contracts in silver, as the price of silver posted its largest monthly gain in nearly 30 years, making silver the worst performing market this month. Gains in trading futures contracts in gold, the Australian dollar and European interest rates were not enough to offset losses elsewhere in the portfolio. The Partnership experienced a loss in May 2011. Long positions in futures on the U.S. dollar and short crude positions exploited weaknesses in those markets and led to modest gains. Despite these early gains, the Partnership closed the month with six consecutive down days on trading in futures contracts on foreign currencies, silver, and U.S. equities. The Partnership experienced a loss in June 2011. The Partnership suffered from its long positions in futures contracts on the S&P 500 on the worst day of the year for that index. Losses in currency trading occurred primarily in the euro and Canadian dollar. Silver trading was the program’s best performing market, with the Partnership holding short positions as the price of silver fell during the month. The Partnership traded well in futures contracts on U.S. and European bonds boosting returns in interest rates, however performance overall was negative at month end.
First Quarter 2011. The Partnership experienced a loss in January 2011, as markets reacted strongly to political unrest in Egypt. The Partnership was well positioned to take advantage of movements in the price of futures contracts on the Euro, which secured some gains. An extended short position in futures contracts on Silver also added positively to performance. The Partnership ended the month down on difficult trading of crude oil futures at the end of the month. The Partnership achieved a gain in February 2011. Strong trading in stock index futures and U.S. interest rates drove February performance as unrest in the Middle East increased volatility in world markets. The Partnership participated on both sides of the market as volatility in the medium and long-term U.S. treasury futures helped to generate profits. Trading on currency futures was flat for the month, despite significant gains in trading futures contracts on the Euro. The Partnership experienced a loss in March 2011. The Partnership suffered losses on long positions in Japanese equities and crude oil as news of the earthquake in Japan broke. The Partnership increased its long positions in futures contracts on Japanese equities as the markets fell, and the subsequent rebound made up for the initial losses. Gains in trading futures contracts on the Euro were offset by losses in futures contracts on the U.S. Treasury markets, as the Partnership ended the month down.
2010
During 2010, the Partnership achieved net realized and unrealized gains of $275,424 from all trading; gains of $248,920 from trading of futures contracts including brokerage commissions of $1,178,732. The Partnership accrued net expenses of $2,572,939, including $375,888 in incentive fees, $904,887 in management fees paid to the General Partner, and $1,094,195 in service and professional fees. The Partnership earned $340,113 in interest income during 2010. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for each quarter during 2010 is set forth below.
Fourth Quarter 2010. The Partnership achieved a gain in October of 2010 as the Partnership exploited falling US Government debt yields which pushed the US Dollar lower against the Japanese yen. Volatility in gold futures proved to be profitable for the Partnership during the month and soybean futures trading added significantly to the month’s returns. Trading in silver and natural gas futures also made a meaningful contribution to the gains achieved for the month. The Partnership experienced a loss in November of 2010 as performance trailed off during the month’s second and third weeks. Corn and sugar futures accounted for the biggest gains in agricultural trading, as sugar hit a 30-year high during the month. The Partnership later profited from a short position during a sharp sell-off of sugar. After an excellent start to the month in crude oil futures trading, the Partnership suffered losses as crude oil made significant downward moves mid month. The Partnership experienced a gain in December with trading in stock index futures, interest rates and currencies contributing to profits. Euro currency trading was profitable as the Partnership moved between long and short positions in the currency. Futures trading in crude oil, equity indexes and bonds also yielded solid profits to help achieve gains during the month.
Third Quarter 2010. The Partnership experienced a loss in July of 2010 due in large part to euro and Nasdaq and European stock index futures trading. The Partnership profited from its alternating long and short positions in the Nikkei and US equity index futures. Other profitable contracts included soybean futures as prices rose dramatically in the month’s final three trading days on increased demand for soybeans. The Partnership achieved a gain in August of 2010 as the Partnership captured substantial gains in the interest rate and energy sectors. The Partnership capitalized on its positions in German interest rate futures as they set all-time price highs during the month with yields at record lows. The Partnership established a short position in crude oil futures as prices dropped on increased inventories. The Partnership achieved a gain in September of 2010 primarily on long positions in futures contracts on US stock indexes. Trading in the longer-term US Treasury markets, contributed the bulk of gains in the interest rate sector during the month.
Second Quarter 2010. The Partnership experienced a loss in April of 2010 amid strong sell-offs in the U.S. equity markets. Short positions in futures contracts on the U.S. equity markets were profitable even though the month ended with performance down. The Partnership started the month strongly, spurred by long positions in gold, silver and copper contracts. The Partnership profited in the agricultural sector during the month, led by its trading of soybeans and sugar contracts, despite ending April negative. The Partnership experienced a loss in May of 2010. After beginning the month net short U.S. stock index futures, the Partnership spent the remainder of the month heavily tilted to the long side as the U.S. equity markets declined. The Partnership also suffered losses in Dax and yen trading despite gains in trading contracts on crude oil, the Euro and U.S. Government bonds. The Partnership achieved gains in June of 2010 with energy products driving performance during the month. A short position in crude oil futures benefitted from a decline in crude oil prices and a weaker-than-expected manufacturing report. The Partnership also held a profitable long position in natural gas futures throughout the month. Stock index futures trading generated positive returns as equity market volatilities retreated. A positive month in metals trading was primarily attributable to continued increases in the price of gold which again reached an all-time high.
First Quarter 2010. In January of 2010 the Partnership’s performance was down with interest rate futures trading proving to be particularly difficult. The Partnership held a strong, sector-wide, short bias during the first half of the month when prices in 11 out of 12 of the contracts traded rose substantially during the month. The Partnership also suffered significant losses in Nikkei index futures, Australian dollar, Japanese yen, silver and crude oil contracts. February saw the Partnership’s performance fall slightly during the month. The Partnership initially capitalized from its short positions as stock and commodity markets plummeted on troubling news of the Greek budget deficit, however, as the situation stabilized, the Partnership gave back those profits. Short positions in stock index futures, crude oil and the euro drove returns early in the month. Performance fell mid-month largely attributable to short positions in the metals, energies and agricultural commodities, particularly in the gold and crude oil markets. The Partnership suffered through difficult trading early in March of 2010. Performance began to stabilize during the second half of the month as the Partnership began to eke out positive returns. Strong end of month performance in Nikkei index futures combined with solid month-long performance in U.S. equities index futures allowed for the sector to be slightly profitable, despite overall negative performance for the month.
| (d) | Off-Balance Sheet Arrangements |
The Partnership does not engage in off-balance sheet arrangements with other entities.
| (e) | Contractual Obligations |
Not required.
| (f) | Critical Accounting Estimates |
Altegris Funds believes that the Partnership’s most critical accounting estimates relate to the valuation of the Partnership’s assets. Futures and options on futures contracts are valued using the primary exchange’s closing price. Forward currency contracts are stated at fair value using spot currency rates provided by J.P. Morgan Securities and adjusted for interest rates and other typical adjustment factors. U.S. government agency securities are generally valued based on quoted prices in active markets. Corporate notes and repurchase agreements are generally valued at fair value. Security transactions are recorded on the trade date. Realized gains and losses from security transactions are determined using the identified cost method. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income currently.
The Partnership’s financial statements are presented in accordance with U.S. generally accepted accounting principles, which require the use of certain estimates made by the Partnership’s management. Actual results could differ from those estimates. Based on the nature of the business and operations of the Partnership, Altegris Funds believes that the estimates utilized in preparing the Partnership’s financial statements are appropriate and reasonable, however, actual results could differ from these estimates. The estimates used do not provide a range of possible results that would require the exercise of subjective judgment. Altegris Funds further believes that, based on the nature of the business and operations of the Partnership, no other reasonable assumptions relating to the application of the Partnership’s critical accounting estimates other than those currently used would likely result in materially different amounts from those reported.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements required by this item are included herewith following the Index to Financial Statements and are incorporated by reference into this Item 8.
Because the Partnership is a Smaller Reporting Company, as defined by Rule 229.10(f)(1), the supplementary financial information required by Item 302 of Regulation S-K is not required.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A: CONTROLS AND PROCEDURES
(a) The General Partner, with the participation of the General Partner’s principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the period covered by this annual report, and, based on their evaluation, has concluded that these disclosure controls and procedures are effective.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Altegris Funds, the general partner of the Partnership is responsible for the management of the Partnership. Management of Altegris Funds (“Management”) is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Partnership’s internal control over financial reporting includes those 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 transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Partnership’s transactions are being made only in accordance with authorizations of Management 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. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2012. In making this assessment, Management used the criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment and based on the criteria in the COSO framework, management has concluded that, as of December 31, 2012, the Partnership’s internal control over financial reporting was effective.
| (c) | Changes in Internal Control over Financial Reporting |
There were no changes in the Partnership’s internal control over financial reporting during the quarter ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
ITEM 9B: OTHER INFORMATION
None.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
| (a) | Identification of Directors and Executive Officers |
(i) The Partnership has no officers, directors, or employees. The Partnership’s affairs are managed by Altegris Funds (although it has delegated trading and investment authority to the Advisor and administrative duties to Altegris). Altegris Funds is owned by Altegris Holdings, an indirect subsidiary of Genworth, and Altegris Holdings is owned by AssetMark, a direct subsidiary of Genworth. Altegris Funds directors and executive officers are Jon C. Sundt, Robert J. Amedeo, Matthew C. Osborne, Richard G. Pfister, Kenneth I. McGuire, and Gurinder S. Ahluwalia.
Jon C. Sundt (age 52) is the President, CEO and a director of Altegris Funds (October 2004 to present), having also served as a Vice President from July 2002 to October 2004. Mr. Sundt has also been (1) the President, CEO and a director of Altegris Investments, Inc. (Altegris) (July 2002 to present), a current broker-dealer affiliate of Altegris Funds, and formerly an IB and CTA; (2) a manager and the President and CEO of Altegris Advisors, L.L.C. (Advisors), an affiliate of Altegris Funds and an SEC-registered investment adviser (February 2010 to present); (3) a manager and the President and CEO of Altegris Futures, L.L.C. (Altegris Futures), an IB and an affiliate of Altegris Funds (September 2010 to present); (4) a manager and the President and CEO of Altegris Clearing Solutions, L.L.C. (formerly known as Altegris Partners, L.L.C.) (Clearing Solutions), an IB and CTA and an affiliate of Altegris Funds (December 2008 to present); (5) a manager and the President and CEO of Altegris Services, L.L.C. (Services), an administrative and operations affiliate of Altegris Funds (May 2010 to present); and (6) the President and CEO of Altegris Holdings, a holding company which directly owns Altegris Funds, Altegris, Advisors, Altegris Futures, Clearing Solutions and Services (October 2012 to present). Mr. Sundt became a principal of Altegris Funds in July 2002. Mr. Sundt attended the University of California, San Diego.
Robert J. Amedeo (age 59) has served as a director of Altegris Funds since July 2002. He has also been a Vice President of Altegris Funds (October 2004 to January 2011), and President of Altegris Funds (July 2002 to October 2004), and he currently serves as Executive Vice President (January 2011 to present). Mr. Amedeo has also been (1) an Executive Vice President and director of Altegris; (2) a manager and Executive Vice President of Advisors (February 2010 to present); (3) a manager and Executive Vice President of Clearing Solutions (December 2008 to present); (4) a manager and Executive Vice President of Services (May 2010 to present); (5) a manager and Executive Vice President of Altegris Futures (September 2010 to present); and (6) Executive Vice President of Altegris Holdings (October 2012 to present). In addition to his responsibilities as an officer and director of Altegris Funds and Altegris, Mr. Amedeo has pursued business development projects for the companies and their affiliates. Mr. Amedeo is a graduate of Northwestern University and received a Juris Doctor degree from DePaul University. Mr. Amedeo is currently Chairman of the NFA’s CPO/CTA Advisory Committee.
Matthew C. Osborne (age 48) has served as a director of Altegris Funds since July 2002. He has also served as a Vice President of Altegris Funds (July 2002 to January 2011), and currently serves as Executive Vice President (January 2011 to present). Mr. Osborne has also been (1) an Executive Vice President, Chief Investment Officer and a director of Altegris (July 2002 to May 2010); (2) a manager and Executive Vice President of Advisors (February 2010 to present); (3) a manager and Executive Vice President of Clearing Solutions (December 2008 to present); (4) a manager and Executive Vice President of Services (February 2010 to present); (5) a manager and Executive Vice President of Altegris Futures (September 2010 to present); and (6) Executive Vice President of Altegris Holdings (October 2012 to present).
Richard G. Pfister (age 41) has served as a director of Altegris Funds since October 2004. He has also served as a Vice President (October 2004 to January 2011) and currently serves as Executive Vice President (January 2011 to present). Mr. Pfister has also served as (1) an Executive Vice President and director of Altegris
(October 2004 to present); (2) a manager and Executive Vice President of Clearing Solutions (December 2008 to present); (3) a manager and Executive Vice President of Altegris Futures (September 2010 to present); and (4) Executive Vice President of Altegris Holdings (October 2012 to present). Mr. Pfister graduated from the University of San Diego and holds the Chartered Alternative Investments Analyst (CAIA) designation.
Kenneth I. McGuire (age 54) became the Chief Operating Officer of Altegris Funds in May 2010 and is a principal of Altegris Funds (June 2010 to present). Mr. McGuire also serves as Chief Operating Officer for Advisors (February 2010 to present), and Services (May 2010 to present). Mr. McGuire also serves as Chief Operating Officer of Altegris Holdings (October 2012 to present). His duties within the Altegris Companies include supervision of personnel in the software development, information technology, fund operations and futures operations businesses of the Altegris Companies. During the past five years, Mr. McGuire was employed by The Bank of New York Mellon, an asset management and securities services company, as a Managing Director (April 2006 to October 2009). Mr. McGuire was employed within BNY Mellon Alternative Investment Services, serving as Product Manager for that unit’s Single Manager Hedge Fund services. Mr. McGuire was a Strategic Advisor with Harvest Technology, a boutique investment technology consultancy (May 2005 to April 2006). Mr. McGuire graduated Magna Cum Laude from Hofstra University with a degree in Computer Science/Mathematics and received his MBA with a concentration in Management from Adelphi University.
Gurinder S. Ahluwalia (age 47) became a Director and principal of Altegris Funds in January 2011. Mr. Ahluwalia also serves as a director of Altegris Holdings (October 2012 to present). Mr. Ahluwalia has also served as a manager of Clearing Solutions, Altegris Futures and Advisors (January 2011 to present). Mr. Ahluwalia has served as President and CEO of Genworth Financial Wealth Management (GFWM), an investment advisory firm (June 2009 to present), as Co-Chairman of GFWM (July 2008 to June 2009), and as Vice Chairman of AssetMark Investment Services, Inc. (“AssetMark Services”) (August 2006 to July 2008). GFWM was created by the 2008 combination of two affiliated investment advisory firms: AssetMark Services and Genworth Financial Asset Management, Inc. (“GFAM”). Mr. Ahluwalia has also served in the capacities as: (i) President, Chairman and a Trustee of Genworth Financial Asset Management Funds, a mutual fund complex (February 2004 to present); (ii) a Trustee of the Genworth Variable Insurance Trust, a mutual fund offered through variable insurance products (July 2008 to present); and (iii) as a Director on the Boards of GFWM (August 2008 to present), GFAM (January 2004 to August 2008), Genworth Financial Trust Company (“GFTC”), an Arizona chartered trust company and custodian (January 2004 to present), Centurion Financial Advisors, Inc. (“CFA”), an investment advisory firm (January 2004 to present), and Centurion Capital Group, Inc., an intermediate holding company for CFA, GFWM and GFTC (January 2004 to present). In addition, Mr. Ahluwalia has since July 2006 served as a Vice President of Genworth, the publicly traded global financial security company and parent company of Altegris Funds and its direct affiliates, as well as the ultimate parent holding company for all other Genworth affiliated companies. Mr. Ahluwalia holds a B.S. in Computer Science from New York University, a B.E. in Electrical Engineering from Cooper Union, and an M.S. in Electrical Engineering from the New Jersey Institute of Technology.
None of the individuals listed above currently serves as a director of a public company.
| | (ii) | Identification of Certain Significant Employees |
None.
| | (iii) | Family Relationships |
None.
See above.
| | (v) | Involvement in Certain Legal Proceedings. |
None.
| | | Promoters and Control Persons |
Not Applicable.
| (b) | Section 16(a) Beneficial Ownership Reporting Compliance |
Altegris Funds, Jon C. Sundt, Robert J. Amedeo, Matthew C. Osborne and Richard G. Pfister each filed initial reports on Form 3 after the Interests became registered under Section 12 of the Securities Exchange Act of 1934. Gurinder Ahluwalia filed an initial report on Form 3 after being appointed a director of Altegris Funds in January 2011.
The Partnership has no employees, officers or directors and is managed by Altegris Funds. Effective April 1, 2013, Altegris Funds has adopted a Code of Ethics that applies to all its employees, associated persons, and principal executive officers. A copy of this Code of Ethics may be obtained at no charge by written request to Altegris Funds, 1202 Bergen Parkway, Suite 212, Evergreen, Colorado 80439. Previously, Altegris Funds adopted all or substantially all of the code of ethics of Genworth Financial, Inc on March 22, 2012. Richard G. Pfister previously filed a Form 5 in April, 2011, a late filing. No subsequent filings on Form 4 or Form 5 have been required as there have been no changes in beneficial ownership of the Partnership that would trigger Form 4 or Form 5 filing requirements during the period.
Not applicable.
ITEM 11: EXECUTIVE COMPENSATION
The Partnership has no officers, directors, or employees. None of the principals, officers, or employees of Altegris Funds or Altegris receives compensation from the Partnership. All persons serving in the capacity of officers or executives of Altegris Funds, the General Partner of the Partnership, are compensated by Altegris, a wholly-owned subsidiary of Genworth Financial, Inc. as of December 31, 2010 and/or an affiliate in respect of their respective positions with such entities. Altegris Funds receives a monthly management fee equal to 1/12 of 1.25% of the management fee net asset value of the month-end capital account balances attributable to Class A and Class B Interests and equal to 1/12 of 0.75% of the management fee net asset value of the month-end capital account balances attributable to Institutional Interests. Altegris Funds also receives a monthly administrative fee equal to 1/12 of 0.333% of the management fee net asset value of the month-end capital account balances attributable to Class A and Class B Interests.
Altegris receives continuing monthly compensation from the Partnership equal to 1/12 of 2% of the month-end net asset value of Class A Interests sold by Altegris.
From January 1, 2012, Altegris Futures, in its capacity as Introducing Broker to the Partnership, received compensation for brokerage-related services. The Partnership will pay monthly brokerage charges equal to the greater of (A) actual commissions of $9.75 per round-turn (higher for certain exchanges or commodities) multiplied by number of round-turn trades, which amount includes other transaction costs; or (B) an amount equal to 0.125% of the management fee net asset value of all Interest holders’ month-end capital account balances (1.50% annually). If actual monthly commissions and transaction costs in (A) above are less than the amount in (B) above, the Partnership will pay the difference to the Introducing Broker as payment for brokerage-related services. In any month when the amount in (A) is greater than the amount in (B) above, the Partnership will pay only the amount described in (A) above.
The Partnership has no other compensation arrangements. There are no compensation plans or arrangements relating to a change in control of the Partnership. On December 31, 2010 Altegris Funds was acquired by Genworth Financial, Inc. in a transaction reported on Form 8-K on January 6, 2011.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
| (a) | Security ownership of certain beneficial owners |
Not applicable.
| (b) | Security Ownership of Management |
The Partnership has no officers or directors. Under the terms of the Limited Partnership Agreement, the Partnership’s affairs are managed by Altegris Funds, which has delegated discretionary authority over the Partnership’s trading to QIM. As of February 28, 2013, Altegris Funds’ general partner interest in the Partnership was valued at $856, which constituted approximately 0% of the Partnership’s total assets. Altegris Funds and the principals of Altegris Funds may purchase Interests. As of February 28, 2013, the following directors and executive officers of Altegris Funds owned Interests in the Partnership: Jon C. Sundt, Robert J. Amedeo, Richard G. Pfister, and Matthew Osborne. The direct and indirect holding of Interests of each director and executive officer and the total aggregate ownership of Interests is less than 1% of the Partnership’s total assets.
None.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The Partnership does not engage in any transactions with Altegris Funds or its affiliates other than in respect of the services and payment of fees therefor described above in Item 1.
The Partnership paid to Altegris Funds monthly management fees totaling $1,454,056 for the year ended December 31, 2012. The Partnership paid to Altegris Funds administrative fees totaling $329,013 for the year ended December 31, 2012.
The Partnership paid to Altegris monthly continuing compensation of $286,599 for the year ended December 31, 2012. Altegris Futures, in its capacity as the Introducing Broker for the Partnership, received from the Partnership’s clearing broker the following compensation: a portion of the brokerage commissions paid by the Partnership to the clearing broker, and of the interest income earned on Partnership’s assets held at the clearing broker, equal to $424,344 for the year ended December 31, 2012. Newedge served as the clearing broker for the Partnership until August 2012, at which point J.P. Morgan Securities became the clearing broker for the Partnership. Newedge continues to serve as a reserve clearing broker for the Partnership. In addition, Altegris Futures, in its capacity as Introducing Broker, receives from the Partnership, monthly brokerage charges as described in Item 11. For the year ended December 31, 2012 the Partnership paid monthly brokerage charges of $459,633.
The Partnership has not and does not make any loans to the General Partner, its affiliates, their respective officers, directors or employees or the immediate family members of any of the foregoing, or to any entity, trust or other estate in which any of the foregoing has any interest, or to any other person.
None of the General Partner, its affiliates, their respective officers, directors and employees or the immediate family members of any of the foregoing, or any entity trust or other estate in which any of the foregoing has any interest has, to date, sold any asset, directly or indirectly, to the Partnership.
The Partnership has no directors, officers or employees and is managed by the General Partner. The General Partner is managed by certain of its principals, none of whom is independent of the General Partner.
ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth (a) the fees billed to the Partnership for professional audit services provided by Ernst & Young, LLP, the Partnership’s independent registered public accountant, for the audit of the Partnership’s annual financial statements for the years ended December 31, 2012 and December 31, 2011. The audit fee for the year ended December 31, 2011 include fees paid to the predecessor auditor for professional audit services provided for the first quarter of 2011.
| FEE CATEGORY | 2012 | 2011 |
| | | |
| Audit Fees | $52,000 | $47,000 |
| Audit-Related Fees | - | - |
| Tax Fees | $53,500 | 53,500 |
| All Other Fees | - | - |
| | | |
| TOTAL FEES | $105,500 | $100,500 |
Audit Fees consist of fees paid to Ernst and Young LLP for (i) the audit of Altegris QIM Futures Fund, L.P.’s annual financial statements included in the annual report on Form 10-K, and review of financial statements included in the quarterly reports on Form 10-Q (ii) services that are normally provided by the Independent Registered Public Accountants in connection with statutory and regulatory filings of registration statements.
Tax Fees consist of fees paid to Ernst and Young LLP for professional services rendered in connection with tax compliance and Partnership income tax return filings.
The board of directors of Altegris Funds pre-approves the engagement of the Partnership’s auditor for all services to be provided by the auditor.
PART IV
ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Financial Statements
The financial statements and balance sheets required by this Item are included herewith, beginning after the signature page hereof, and are incorporated into this Item 15.
Exhibits
The following documents (unless otherwise indicated) are filed herewith and made part of this registration statement.
| Exhibit Designation | Description |
| | |
| * 3.1 | Certificate of Formation of APM – QIM Futures Fund L.P. |
| | |
| * 4.1 | Limited Partnership Agreement of APM – QIM Futures Fund L.P. |
| | |
| * 10.1 | Agreement with Quantitative Investment Management LLC |
| | |
| * 10.2 | Selling Agency Agreement between APM – QIM Futures Fund L.P. and Altegris Investments Inc. |
| | |
| 31.01 | Rule 13a-14(a)/15d-14(a) Certification |
| | |
| 32.01 | Section 1350 Certification |
| * | This exhibit is incorporated by reference to the exhibit of the same number and description filed with the Partnership’s Registration Statement (File No. 000-53815) filed on November 2, 2009 on Form 10-12G under the Securities Exchange Act of 1934. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| Dated: April 1, 2013 | | Altegris QIM FUTURES FUND, L.P. | |
| | | | | |
| | | By: | ALTEGRIS PORTFOLIO MANAGEMENT, INC. | |
| | | | | |
| | | By: | /s/ Jon C. Sundt | |
| | | Name: | Jon C. Sundt | |
| | | Title: | Principal Executive and Principal Financial Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the General Partner of the Registrant and in the capacities and on the date indicated.
| | | |
| | By: | /s/ Jon C. Sundt | |
| | Name: | Jon C. Sundt | |
| | Title: | Executive Officer, Principal Financial Officer and majority of the board of directors, or equivalent thereof, of Altegris Portfolio Management, Inc. |
ALTEGRIS QIM FUTURES FUND, L.P.
