Exhibit 13.01(d)
NETS GLOBAL HORIZONS, LLC
(Liquidation Basis)
(A Delaware Limited Liability Company)
Financial Statements for the period from January 1, 2013 to
March 31, 2013 (Liquidation Basis) and for the year ended
December 31, 2012 and Independent Auditors’ Report
NETS GLOBAL HORIZONS, LLC (LIQUIDATION BASIS)
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
| Page |
|
|
INDEPENDENT AUDITORS’ REPORT | 1 |
|
|
FINANCIAL STATEMENTS (LIQUIDATION BASIS): |
|
|
|
Statements of Financial Condition as of March 31, 2013 (Liquidation Basis) and December 31, 2012 | 2 |
|
|
Statements of Operations for the period from January 1, 2013 to March 31, 2013 |
|
(Liquidation Basis) and for the year ended December 31, 2012 | 3 |
|
|
Statements of Changes in Members’ Capital for the period from January 1, 2013 to March 31, 2013 |
|
(Liquidation Basis) and for the year ended December 31, 2012 | 4 |
|
|
Financial Data Highlights for the period from January 1, 2013 to March 31, 2013 |
|
(Liquidation Basis) and for the year ended December 31, 2012 | 5 |
|
|
Notes to Financial Statements (Liquidation Basis) | 6-20 |
INDEPENDENT AUDITORS' REPORT
To the Members of Nets Global Horizons, LLC:
We have audited the accompanying financial statements of Nets Global Horizons, LLC (the “Company”), which comprise the statements of financial condition as of March 31, 2013 (liquidation basis) and December 31, 2012, and the related statements of operations, changes in members’ capital, for the period January 1, 2013 to March 31, 2013 (liquidation basis) and the year ended December 31, 2012, and the financial data highlights for the periods presented, and the related notes to the financial statements (liquidation basis).
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements and financial highlights in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements and financial highlights that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements and financial data highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial data highlights are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and financial data highlights. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements and financial data highlights, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements and financial data highlights in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and financial data highlights.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements and financial data highlights referred to above present fairly, in all material respects, the financial position of Nets Global Horizons, LLC as of March 31, 2013 (liquidation basis) and December 31, 2012, the results of its operations, changes in its members’ capital, and financial data highlights for the period and year presented, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter Regarding Liquidation Basis of Accounting
As discussed in Note 1 to the financial statements, the General Partner terminated the advisory agreement with the Trading Advisor for the Company on February 22, 2013. Upon termination of the Agreement, the Company changed its basis of accounting from the going concern basis to the liquidation basis of accounting and has pursued an orderly liquidation of the Company. Our opinion is not modified with respect to this matter.
DELOITTE & TOUCHE LLP
September 11, 2013
NETS GLOBAL HORIZONS, LLC
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 2013 (LIQUIDATION BASIS) AND DECEMBER 31, 2012
|
| March 31, |
| December 31, |
| ||
|
| 2013 |
| 2012 |
| ||
|
|
|
|
|
| ||
ASSETS: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 18,554 |
| $ | 26,712,321 |
|
Equity in commodity futures trading accounts: |
|
|
|
|
| ||
Cash (restricted cash $0 and $2,095,713) |
| 8,716 |
| 5,138,261 |
| ||
Net unrealized profit on open contracts |
| 30,179 |
| — |
| ||
Due from BlackRock Global Horizons I L.P. |
| 21,848 |
| — |
| ||
Accrued interest and other assets |
| 135 |
| 1,319 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
| $ | 79,432 |
| $ | 31,851,901 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS’ CAPITAL |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Net unrealized loss on open contracts |
| $ | — |
| $ | 91,517 |
|
Due to BlackRock Global Horizons I L.P. |
| — |
| 997,556 |
| ||
Redemptions payable |
| — |
| 950,000 |
| ||
Trading Advisor’s management fees payable |
| — |
| 22,700 |
| ||
Administrator fees payable |
| 18,544 |
| 17,468 |
| ||
Professional fees payable |
| 57,083 |
| 31,250 |
| ||
Other fees payable |
| 3,805 |
| 5,667 |
| ||
|
|
|
|
|
| ||
Total liabilities |
| 79,432 |
| 2,116,158 |
| ||
|
|
|
|
|
| ||
MEMBERS’ CAPITAL |
| — |
| 29,735,743 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS’ CAPITAL |
| $ | 79,432 |
| $ | 31,851,901 |
|
See notes to financial statements (liquidation basis).
NETS GLOBAL HORIZONS, LLC
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS FOR THE PERIOD FROM JANUARY 1, 2013
TO MARCH 31, 2013 (LIQUIDATION BASIS) AND FOR THE YEAR ENDED DECEMBER 31, 2012
|
| 2013 |
| 2012 |
| ||
TRADING PROFITS (LOSSES): |
|
|
|
|
| ||
Realized |
| $ | (342,485 | ) | $ | (6,661,564 | ) |
Change in unrealized |
| 105,155 |
| 128,008 |
| ||
Brokerage commissions and clearing costs |
| (4,265 | ) | (73,267 | ) | ||
|
|
|
|
|
| ||
Total trading profits (losses) |
| (241,595 | ) | (6,606,823 | ) | ||
|
|
|
|
|
| ||
INVESTMENT INCOME: |
|
|
|
|
| ||
Interest |
| — |
| 47,328 |
| ||
|
|
|
|
|
| ||
EXPENSES: |
|
|
|
|
| ||
Trading Advisor’s management fees |
| 88,076 |
| 851,236 |
| ||
Administrator fees |
| 9,472 |
| 94,334 |
| ||
Professional fees |
| 34,219 |
| 158,204 |
| ||
Other fees |
| 114,886 |
| 1,110,434 |
| ||
Total expenses |
| 246,653 |
| 2,214,208 |
| ||
|
|
|
|
|
| ||
NET INVESTMENT LOSS |
| (246,653 | ) | (2,166,880 | ) | ||
|
|
|
|
|
| ||
NET LOSS |
| $ | (488,248 | ) | $ | (8,773,703 | ) |
See notes to financial statements (liquidation basis).
NETS GLOBAL HORIZONS, LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL FOR THE PERIOD FROM
JANUARY 1, 2013 TO MARCH 31, 2013 (LIQUIDATION BASIS) AND FOR THE YEAR ENDED
DECEMBER 31, 2012
MEMBERS’ CAPITAL, DECEMBER 31, 2011 |
| $ | 50,218,492 |
|
|
|
|
| |
Additions |
| 3,127,169 |
| |
|
|
|
| |
Net loss |
| (8,773,703 | ) | |
|
|
|
| |
Redemptions |
| (13,815,456 | ) | |
|
|
|
| |
Net redemptions by BlackRock Global Horizons I L.P. |
| (1,020,759 | ) | |
|
|
|
| |
MEMBERS’ CAPITAL, DECEMBER 31, 2012 |
| 29,735,743 |
| |
|
|
|
| |
Additions |
| 75,334 |
| |
|
|
|
| |
Net loss |
| (488,248 | ) | |
|
|
|
| |
Redemptions |
| (13,468,579 | ) | |
|
|
|
| |
Net redemptions by BlackRock Global Horizons I L.P. |
| (15,854,250 | ) | |
|
|
|
| |
MEMBERS’ CAPITAL, MARCH 31, 2013 |
| $ | — |
|
See notes to financial statements (liquidation basis).
NETS GLOBAL HORIZONS, LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS FOR THE PERIOD FROM JANUARY 1, 2013 TO
MARCH 31, 2013 (LIQUIDATION BASIS) AND FOR THE YEAR ENDED DECEMBER 31, 2012
The following ratios have been derived from information provided in the financial statements. An individual Member’s results may vary from these ratios due to timing of income and expenses and capital transactions.
|
| 2013 |
| 2012 |
|
Total Return: |
|
|
|
|
|
|
|
|
|
|
|
Total return (before Profit Shares) |
| -1.00 | % | -18.48 | % |
Profit Shares |
| 0.00 | % | 0.00 | % |
Total return |
| -1.00 | % | -18.48 | % |
|
|
|
|
|
|
Ratios to Average Net Assets:(1) |
|
|
|
|
|
|
|
|
|
|
|
Expenses (before Profit Shares) |
| 7.41 | %(2) | 5.31 | % |
Profit Shares |
| 0.00 | % | 0.00 | % |
Expenses |
| 7.41 | %(2) | 5.31 | % |
|
|
|
|
|
|
Net investment loss |
| -7.41 | %(2) | -5.20 | % |
(1) Included in the ratios of expenses to average Members’ capital are brokerage commissions and clearing costs which are presented in Trading Profits (Losses) on the Statement of Operations.
(2) The expenses (before Profit Shares) and the interest component have been annualized.
See notes to financial statements (liquidation basis).
NETS GLOBAL HORIZONS, LLC
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS (LIQUIDATION BASIS)
1. ORGANIZATION
Nets Global Horizons, LLC (the “Company”) was formed as a Delaware limited liability company under the Delaware Limited Liability Company Act on November 16, 2009. BlackRock Investment Management, LLC (the “Manager” or “BRIM”), a wholly owned subsidiary of BlackRock, Inc. (“BlackRock”), is the manager of the Company and entered into a limited liability company agreement with the Company on November 24, 2009.
BRIM formed a number of subsidiaries in the form of limited liability companies (“LLCs”), with this Company being one of the LLCs, to hold assets of BlackRock Global Horizons I L.P. (the “Partnership”), an open-end investment company organized under the Delaware Revised Uniform Limited Partnership Act. These LLCs hold the Partnership assets that are allocated by the Partnership to each particular Trading Advisor. Each of these LLCs has, in turn, entered into an advisory agreement (“the Agreement”) with a respective Trading Advisor.
The primary purpose of these LLCs was to segregate the assets of the Partnership allocated to any one Trading Advisor from the other assets of the Partnership in order to seek to limit liability for trading losses by any one Trading Advisor to the Partnership assets allocated to such LLC. Additionally, other funds and accounts managed by the Manager or its affiliates may also invest in such LLCs in order to gain exposure to the relevant Trading Advisor.
Prior to October 1, 2011, the Company was wholly owned by the Partnership, and as a result consolidated into the financial statements of the Partnership. Effective October 1, 2011, the Manager allowed other funds and accounts managed by the General Partner of the Partnership (and affiliates of the General Partner) to invest directly with the Company. The General Partner terminated the advisory agreement with the Trading Advisor for the Company on February 22, 2013. Upon termination of the Agreement, the Company changed its basis of accounting from the going concern basis to the liquidation basis of accounting and has pursued an orderly liquidation of the Company. As of March 31, 2013, the Company had returned all proceeds to members. The financial statements of the Company presented herein reflect the financial position as of March 31, 2013 (liquidation basis) and December 31, 2012, the results of operations, changes in members’ capital and financial data highlights for the period January 1, 2013 to March 31, 2013 (liquidation basis) and for the year ended December 31, 2012.
The Bank of New York Mellon provides custody services for the Company. The Company’s assets are held in cash and a customer segregated managed account at J.P. Morgan Securities LLC (“JPMS”).
Capitalized terms used throughout the notes without definition have the same meaning as set forth in the Agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) on a liquidation basis as of March 31, 2013 and for the period from January 1, 2013 to March 31, 2013. The financial statements as of and for the year ended December 31, 2012 were prepared on going concern basis. The preparation of financial statements in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The liquidation basis is appropriate when liquidation is considered imminent and an entity is not viewed as a going concern. The liquidation basis of accounting requires the Company to record assets at their realizable value, liabilities at their anticipated settlement amounts and to provide estimated costs of liquidating to the extent they are determinable.
Cash and Cash Equivalents
The Company has defined cash and cash equivalents as cash, money market funds and short-term, highly liquid investments with maturities of three months or less when acquired. Money market funds, which are included in cash equivalents, are classified as Level 1 valuation inputs (quoted prices in active markets for identical assets) under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”).
Valuation
The Company’s policy is to value its financial instruments at fair market value. The Company’s commodities futures contracts traded on exchanges are valued at their close price. Foreign currency exchange contracts are valued at the midpoint between the bid and ask prices and are determined as of the close of business of the New York Stock Exchange. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Exchange-traded written options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the prior day’s close price, unless it is determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) options are valued by single broker quotes which use mathematical models which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.
Equity in Commodity Futures Trading Accounts
Cash at brokers -
A portion of the assets maintained at JPMS was restricted to meet maintenance margin requirements. Typically, margin requirements ranged from 1% to 10% of the notional value of the derivatives traded.
Net Unrealized Profit (Loss) on Open Contracts -
The Company, in its normal course of business, entered into various derivatives contracts with JPMS which acted as the Company’s clearing broker. Pursuant to the brokerage agreement with JPMS (which included netting arrangements), to the extent that such trading resulted in receivables from and payables to JPMS, these receivables and payables are offset and reported as a net receivable or payable with JPMS. Net receivables are included in the Statements of Financial Condition under Equity in commodity futures trading accounts in Net unrealized profit on open contracts; net payables are included in the Statements of Financial Condition under Liabilities in Net unrealized loss value on open contracts.
Commodity futures and forwards contracts transactions were recorded on the trade date. The receivables and payables for forwards contracts represented the difference between the original contract value and the market value. The receivables and payables for futures contracts represented the variation margin, which was the daily fluctuation in market value of the futures contracts. The change in unrealized profit (loss) on open contracts from one period to the next is reflected in Change in unrealized in the Statements of Operations.
Foreign Currency Transactions
The Company’s functional currency is the U.S. dollar; however, it has trading activities in currencies other than the U.S. dollar. 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 dates of the Statements 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 Realized in the Statements of Operations.
Income Taxes
No provision for income taxes has been made in these financial statements as each Member is individually responsible for reporting income or loss based on such Member’s respective share of the Company’s income and expenses as reported for income tax purposes.
The Company is subject to the provision of ASC 740, Income Taxes which sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Based on its analysis, the Manager does not believe that the Company has any material uncertain tax positions that would require recognition or measurements in the Company’s financial statements.
The Company files U.S. Federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Company’s U.S. Federal tax returns are open for the period ended 2013, the year ended 2012, and the period ended December 31, 2011. The statute of limitations on the Company’s state and local tax returns may remain open for an additional year depending on the jurisdiction.
There are no unrecognized tax benefits relating to the accompanying financial statements.
Distributions
The Members were entitled to receive any distributions which may be made by the Company. No such distributions were declared for the period ended March 31, 2013 or year ended December 31, 2012.
Members Transactions
The Manager could have, in its sole discretion, reallocated Partnership assets from the Company by contributing to or withdrawing amounts from the Company as of any month end.
Indemnifications
In the normal course of business, the Company entered into contracts and agreements that contain a variety of representations and warranties and which provided general indemnifications. The Company’s maximum exposure under these arrangements was unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company expects the risk of any future obligation under these indemnifications to be remote.
3. CONDENSED SCHEDULES OF INVESTMENTS
The Company traded futures and forwards contracts. The level of trading was affected by conditions in those markets. During the period ended March 31, 2013, 598 contracts were closed. The fair value of the Company’s futures and forwards contracts by type that are presented as Net unrealized profit (loss) / market value on open contracts in the Statements of Financial Condition as of March 31, 2013 are as follows:
|
| Long Positions |
| Long Positions |
|
|
| Short Positions |
| Short Positions |
|
|
| Net Unrealized |
|
|
|
|
| |||||||||||||||
Commodity |
| Number |
| Gross Unrealized |
| Unrealized |
| Percent of |
| Number |
| Gross Unrealized |
| Unrealized |
| Percent of |
| Profit (Loss) on |
| Percent of |
|
|
| |||||||||||
Industry Sector |
| of Contracts |
| Gains |
| Losses |
| Profit (Loss) |
| Members’ Capital (1) |
| of Contracts |
| Gains |
| Losses |
| Profit (Loss) |
| Members’ Capital (1) |
| Open Contracts |
| Members’ Capital (1) |
| Maturity Dates |
| |||||||
Futures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Agriculture |
| — |
| $ | — |
| $ | — |
| $ | — |
| N/M |
| — |
| $ | — |
| $ | — |
| $ | — |
| N/M |
| $ | — |
| N/M |
|
|
|
Currencies |
| — |
| — |
| — |
| — |
| N/M |
| — |
| — |
| — |
| — |
| N/M |
| — |
| N/M |
|
|
| |||||||
Energy |
| — |
| — |
| — |
| — |
| N/M |
| — |
| — |
| — |
| — |
| N/M |
| — |
| N/M |
|
|
| |||||||
Interest rates |
| — |
| — |
| — |
| — |
| N/M |
| — |
| — |
| — |
| — |
| N/M |
| — |
| N/M |
|
|
| |||||||
Metals |
| 10 |
| — |
| (46,604 | ) | (46,604 | ) | N/M |
| 10 |
| 76,783 |
| — |
| 76,783 |
| N/M |
| 30,179 |
| N/M |
| April 13 - May 13 |
| |||||||
Stock indices |
| — |
| — |
| — |
| — |
| N/M |
| — |
| — |
| — |
| — |
| N/M |
| — |
| N/M |
|
|
| |||||||
Total |
| 10 |
| $ | — |
| $ | (46,604 | ) | $ | (46,604 | ) | N/M |
| 10 |
| $ | 76,783 |
| $ | — |
| $ | 76,783 |
| N/M |
| $ | 30,179 |
| N/M |
|
|
|
(1) N/M — Percentages are not meaningful as Members’ Capital as of March 31, 3013 was zero.
No individual contract’s unrealized profit or loss comprised greater than 5% of the Company’s capital as of March 31, 2013.
The Company traded futures and forwards contracts. The level of trading was affected by conditions in those markets. During the year ended December 31, 2012, 5,433 contracts were closed. The fair value of the Company’s futures and forwards contracts by type that are presented as Net unrealized profit (loss) / market value on open contracts in the Statements of Financial Condition as of December 31, 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long Positions |
| Long Positions |
|
|
| Short Positions |
| Short Positions |
|
|
| Net Unrealized |
|
|
|
|
| |||||||||||||||
Commodity |
| Number |
| Gross Unrealized |
| Unrealized |
| Percent of |
| Number |
| Gross Unrealized |
| Unrealized |
| Percent of |
| Profit (Loss) on |
| Percent of |
|
|
| |||||||||||
Industry Sector |
| of Contracts |
| Gains |
| Losses |
| Profit (Loss) |
| Members’ Capital |
| of Contracts |
| Gains |
| Losses |
| Profit (Loss) |
| Members’ Capital |
| Open Contracts |
| Members’ Capital |
| Maturity Dates |
| |||||||
Futures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Agriculture |
| 50 |
| $ | — |
| $ | (128,932 | ) | $ | (128,932 | ) | -0.43 | % | (176 | ) | $ | 141,311 |
| $ | (25,300 | ) | $ | 116,011 |
| 0.39 | % | $ | (12,921 | ) | -0.04 | % | February 13 - March 13 |
|
Currencies |
| 102 |
| 21,032 |
| (71,651 | ) | (50,619 | ) | -0.17 | % | (20 | ) | 120,000 |
| — |
| 120,000 |
| 0.40 | % | 69,381 |
| 0.23 | % | March 13 |
| |||||||
Energy |
| 10 |
| 4,989 |
| (6,964 | ) | (1,975 | ) | -0.01 | % | (34 | ) | 33,953 |
| (31,918 | ) | 2,035 |
| 0.01 | % | 60 |
| 0.00 | % | January 13 - February 13 |
| |||||||
Interest rates |
| 72 |
| 16,661 |
| (9,829 | ) | 6,832 |
| 0.02 | % | (18 | ) | 12,104 |
| (3,084 | ) | 9,020 |
| 0.03 | % | 15,852 |
| 0.05 | % | March 13 - June 13 |
| |||||||
Metals |
| 31 |
| 48,405 |
| (35,391 | ) | 13,014 |
| 0.05 | % | (52 | ) | 26,378 |
| (79,691 | ) | (53,313 | ) | -0.18 | % | (40,299 | ) | -0.13 | % | January 13 - March 13 |
| |||||||
Stock indices |
| 10 |
| 3,246 |
| (6,325 | ) | (3,079 | ) | -0.01 | % | (127 | ) | 67,767 |
| (188,278 | ) | (120,511 | ) | -0.41 | % | (123,590 | ) | -0.42 | % | January 13 - March 13 |
| |||||||
Total |
| 275 |
| $ | 94,333 |
| $ | (259,092 | ) | $ | (164,759 | ) | -0.55 | % | (427 | ) | $ | 401,513 |
| $ | (328,271 | ) | $ | 73,242 |
| 0.24 | % | $ | (91,517 | ) | -0.31 | % |
|
|
No individual contract’s unrealized profit or loss comprised greater than 5% of the Company’s capital as of December 31, 2012.
The trading profits (losses) of the Company’s derivatives by instrument type, as well as the location of those gains and losses on the Statements of Operations for the period ended March 31, 2013 and the year ended December 31, 2012 are as follows:
2013
|
|
|
| Change in Net |
|
|
| |||
Commodity |
| Realized Profits |
| Unrealize |
| Net Trading |
| |||
Industry Sector |
| (Losses) |
| Profits (Losses) |
| Profits (Losses) |
| |||
|
|
|
|
|
|
|
| |||
Futures |
|
|
|
|
|
|
| |||
Agriculture |
| $ | (3,450 | ) | $ | 12,922 |
| $ | 9,472 |
|
Currencies |
| 353,370 |
| (85,922 | ) | 267,448 |
| |||
Energy |
| 128,756 |
| (60 | ) | 128,696 |
| |||
Interest rates |
| (53,654 | ) | (15,852 | ) | (69,506 | ) | |||
Metals |
| (223,816 | ) | 70,477 |
| (153,339 | ) | |||
Stock indices |
| (543,691 | ) | 123,590 |
| (420,101 | ) | |||
Total |
| $ | (342,485 | ) | $ | 105,155 |
| $ | (237,330 | ) |
2012
|
|
|
| Change in Net |
|
|
| |||
Commodity |
| Realized Profits |
| Unrealized |
| Net Trading |
| |||
Industry Sector |
| (Losses) |
| Profits (Losses) |
| Profits (Losses) |
| |||
|
|
|
|
|
|
|
| |||
Futures |
|
|
|
|
|
|
| |||
Agriculture |
| $ | (604,308 | ) | $ | (2,963 | ) | $ | (607,271 | ) |
Currencies |
| (1,407,870 | ) | 38,478 |
| (1,369,392 | ) | |||
Energy |
| (1,261,824 | ) | 7,764 |
| (1,254,060 | ) | |||
Interest rates |
| 361,596 |
| 156,293 |
| 517,889 |
| |||
Metals |
| (1,331,101 | ) | 45,137 |
| (1,285,964 | ) | |||
Stock indices |
| (2,418,057 | ) | (116,701 | ) | (2,534,758 | ) | |||
Total |
| $ | (6,661,564 | ) | $ | 128,008 |
| $ | (6,533,556 | ) |
4. RELATED PARTY TRANSACTIONS
As of March 31, 2013 and December 31, 2012, $18,554 and $26,712,321, respectively, were invested in an affiliated BlackRock money market fund. The Due from BlackRock Global Horizons I L.P. balance of $21,848 included in the Statements of Financial Condition as of March 31, 2013 represents amounts due to the Company for expenses paid on the Company’s behalf and redemptions of capital from the Company. The Due to BlackRock Global Horizons I L.P. balance of $997,556 included in the Statements of Financial Condition as of December 31, 2012 represents amounts due to BlackRock Global Horizons I L.P. by the Company for expenses paid on the Company’s behalf and subscriptions, redemptions and allocations of capital from the Company.
5. ADVISORY AGREEMENT
The Company and the Trading Advisor had entered into the Agreement, which was terminated on February 22, 2013. The Trading Advisor determined the commodity futures, options on futures, forwards and options contracts trades, if any, to be made on behalf of the Company’s account, subject to certain trading policies and to certain rights reserved by BRIM. The Company paid the Trading Advisor a management fee of 2.0% annually on the allocated Members’ capital.
Profit Shares, which are 17% of any New Trading Profit, were paid by the Company to the Trading Advisor as of the end of each year and upon the net reallocation of assets away from the Trading Advisor. Profit Shares were also paid out in respect of Member redemptions as of the end of interim months, to the extent of the applicable percentage of any New Trading Profit attributable to such Member.
6. MEMBERS’ CAPITAL
At March 31, 2013 and December 31, 2012, the Members’ capital balances were:
March 31, 2013 |
| Members’ |
| |
|
|
|
| |
BlackRock Global Horizons I L.P. |
| $ | — |
|
Concentrated Quantitative Strategies LTD. |
| — |
| |
Core Hedge Fund Strategies LTD. |
| — |
| |
Multi Manager Alpha Systematic Trend LTD. |
| — |
| |
Total Members’ Capital |
| $ | — |
|
December 31, 2012 |
| Members’ |
| |
|
|
|
| |
BlackRock Global Horizons I L.P. |
| $ | 17,110,071 |
|
Concentrated Quantitative Strategies LTD. |
| 8,515,400 |
| |
Core Hedge Fund Strategies LTD. |
| 541,496 |
| |
Multi Manager Alpha Systematic Trend LTD. |
| 3,568,776 |
| |
Total Members’ Capital |
| $ | 29,735,743 |
|
Each Member shared in the operations of the Company in proportion to their respective interests in the Company.
7. FAIR VALUE DISCLOSURES
All investments including derivatives are stated at fair value in the Statements of Financial Condition, and changes in fair value are included in Realized and Change in unrealized Trading Profits and Losses in the Statements of Operations.
The Company records derivatives contracts held in commodities futures trading accounts and cash equivalents at fair value in accordance with ASC 820. ASC 820 defines fair value as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk to the extent the asset or liability is not traded on an exchange or an active market. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Manager’s assumptions about what information market participants would use to price an asset or liability developed based on the best information available under the circumstances.
ASC 820 establishes a hierarchy that classifies these inputs into the three broad levels listed below:
Level 1 — Price quotations (unadjusted) in active markets/exchanges for identical instruments.
Level 2 — Other than quoted prices included within Level 1 that are observable for substantially the full term of the asset or liability, either directly or indirectly. Level 2 includes quoted prices (unadjusted) for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and inputs other than quoted prices that are observable or that can be generally corroborated by observable market data, such as those used in models or other valuation methodologies. As a practical expedient, the Company relies on the net asset value (or its equivalent) of certain investments as their fair value.
Level 3 — Primarily inputs and significant assumptions that are unobservable in the market place. Level 3 includes instruments for which there is little, if any, market activity. These inputs require significant judgment or estimation by the Manager of the Company.
There were no Level 3 assets held at March 31, 2013, December 31, 2012 or during the period or the year then ended.
The following table summarizes the valuation of the Company’s investments by the above ASC 820 fair value hierarchy levels as of March 31, 2013 and December 31, 2012.
|
|
|
| Fair Value at Reporting Date Using |
| |||||
|
|
|
| Quoted Prices in |
|
|
| |||
|
|
|
| Active Markets for |
| Significant Other |
| |||
|
|
|
| Identical Assets |
| Observable Inputs |
| |||
Description |
| March 31, 2013 |
| (Level 1) |
| (Level 2) |
| |||
Cash Equivalents |
| $ | 18,554 |
| $ | 18,554 |
| $ | — |
|
Futures (1) |
| 30,179 |
| 30,179 |
| — |
| |||
|
| $ | 48,733 |
| $ | 48,733 |
| $ | — |
|
|
|
|
|
|
|
|
| |||
Description |
| December 31, 2012 |
|
|
|
|
| |||
Cash Equivalents |
| $ | 26,712,321 |
| $ | 26,712,321 |
| $ | — |
|
Futures (1) |
| (91,517 | ) | (91,517 | ) | — |
| |||
|
| $ | 26,620,804 |
| $ | 26,620,804 |
| $ | — |
|
(1) See Condensed Schedules of Investments in Note 3 for the values in each commodity industry sector within this table.
There were no transfers between Level 1 and Level 2 during the period ended March 31, 2013 or the year ended December 31, 2012.
8. OFF-BALANCE SHEET RISK
The nature of this Company has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative contracts involve varying degrees of off-balance sheet market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial contracts or commodities underlying such open derivative contracts frequently result in changes in the Company’s net unrealized profit (loss) on such derivative contracts as reflected in the Statements of Financial Condition. The Company’s exposure to market risk is influenced by a number of factors, including the relationships among the derivative contracts held by the Company as well as the volatility and liquidity of the markets in which the derivative contracts are traded. Investments in foreign markets may also entail legal and political risks.
For derivatives, risks arise from changes in the market value of the contracts. Theoretically, the Company is exposed to a market risk equal to the notional contract value of futures and forward currency contracts purchased and unlimited liability on such contracts sold short.
BRIM has procedures in place intended to control market risk exposure, although there can be no assurance that it will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of the Trading Advisor, calculating the net asset value of the Company as of the close of business on each day and reviewing outstanding positions for over-concentrations. BRIM’s basic risk control procedures consist simply of the ongoing process of Trading Advisor monitoring, with the market risk controls being applied by the Trading Advisor.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with OTC (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. In OTC transactions, on the other hand, the Trading Advisor must rely solely on the credit of their respective individual counterparties. Margins, which were subject to loss in the event of a default, were generally required in exchange trading, and JPMS could also have required margin in the OTC markets.
Set forth below are tables which disclose both gross information and net information about instruments and transactions eligible for offset in the Statements of Financial Condition and instruments and transactions that are subject to an agreement similar to a master netting agreement as well as amounts related to margin, reflected as financial collateral (including cash collateral), held at JPMS. Margin reflected in the Collateral Tables reflect margin up to an amount of 100% of the net amount of unrealized loss for JPMS. Actual margin amounts required at each counterparty are based on the notional amounts or the number of contracts outstanding and may exceed the margin presented in the Collateral Tables. The master netting agreements allow JPMS to net any collateral held in or on behalf of the Company or liabilities or payment obligations of JPMS to the Company against any liabilities or payment obligations of the Company to JPMS. The Company is required to deposit financial collateral (including cash collateral) at JPMS. Such requirements were specific to JPMS.
As of 3/31/2013
Offsetting of Net unrealized profit / market value on open contracts / options:
|
|
|
| Gross |
| Net |
| |||
|
| Gross |
| Amounts offset in |
| Amounts presented in |
| |||
Commodity |
| Amounts of |
| the Statements of Financial |
| the Statements of Financial |
| |||
Industry Sector |
| Recognized Assets |
| Position |
| Position |
| |||
Futures |
|
|
|
|
|
|
| |||
Agriculture |
| $ | — |
| $ | — |
| $ | — |
|
Currencies |
| — |
| — |
| — |
| |||
Energy |
| — |
| — |
| — |
| |||
Interest rates |
| — |
| — |
| — |
| |||
Metals |
| 76,783 |
| 46,604 |
| 30,179 |
| |||
Stock indices |
| — |
| — |
| — |
| |||
Subtotal |
| 76,783 |
| 46,604 |
| 30,179 |
| |||
|
|
|
|
|
|
|
| |||
Total Derivatives subject to a master netting or similar arrangement |
| 76,783 |
| 46,604 |
| 30,179 |
| |||
Total Derivatives not subject to a master netting or similar arrangement |
| — |
| — |
| — |
| |||
|
|
|
|
|
|
|
| |||
Total Derivatives |
| $ | 76,783 |
| $ | 46,604 |
| $ | 30,179 |
|
Offsetting of Net unrealized loss / market value on open contracts / options:
|
|
|
| Gross |
| Net |
| |||
|
| Gross |
| Amounts offset in |
| Amounts presented in |
| |||
Commodity |
| Amounts of |
| the Statements of Financial |
| the Statements of Financial |
| |||
Industry Sector |
| Recognized Liabilities |
| Position |
| Position |
| |||
Futures |
|
|
|
|
|
|
| |||
Agriculture |
| $ | — |
| $ | — |
| $ | — |
|
Currencies |
| — |
| — |
| — |
| |||
Energy |
| — |
| — |
| — |
| |||
Interest rates |
| — |
| — |
| — |
| |||
Metals |
| 46,604 |
| 46,604 |
| — |
| |||
Stock indices |
| — |
| — |
| — |
| |||
Subtotal |
| 46,604 |
| 46,604 |
| — |
| |||
|
|
|
|
|
|
|
| |||
Total Derivatives subject to a master netting or similar arrangement |
| 46,604 |
| 46,604 |
| — |
| |||
Total Derivatives not subject to a master netting or similar arrangement |
| — |
| — |
| — |
| |||
|
|
|
|
|
|
|
| |||
Total Derivatives |
| $ | 46,604 |
| $ | 46,604 |
| $ | — |
|
As of 12/31/2012
Offsetting of Net unrealized profit / market value on open contracts / options:
|
|
|
| Gross |
| Net |
| |||
|
| Gross |
| Amounts offset in |
| Amounts presented in |
| |||
Commodity |
| Amounts of |
| the Statements of Financial |
| the Statements of Financial |
| |||
Industry Sector |
| Recognized Assets |
| Position |
| Position |
| |||
Futures |
|
|
|
|
|
|
| |||
Agriculture |
| $ | 141,311 |
| $ | 141,311 |
| $ | — |
|
Currencies |
| 141,032 |
| 71,651 |
| 69,381 |
| |||
Energy |
| 38,942 |
| 38,882 |
| 60 |
| |||
Interest rates |
| 28,765 |
| 12,913 |
| 15,852 |
| |||
Metals |
| 74,783 |
| 74,783 |
| — |
| |||
Stock indices |
| 71,013 |
| 71,013 |
| — |
| |||
Subtotal |
| 495,846 |
| 410,553 |
| 85,293 |
| |||
|
|
|
|
|
|
|
| |||
Total Derivatives subject to a master netting or similar arrangement |
| 495,846 |
| 410,553 |
| 85,293 |
| |||
Total Derivatives not subject to a master netting or similar arrangement |
| — |
| — |
| — |
| |||
|
|
|
|
|
|
|
| |||
Total Derivatives |
| $ | 495,846 |
| $ | 410,553 |
| $ | 85,293 |
|
Offsetting of Net unrealized loss / market value on open contracts / options:
|
|
|
| Gross |
| Net |
| |||
|
| Gross |
| Amounts offset in |
| Amounts presented in |
| |||
Commodity |
| Amounts of |
| the Statements of Financial |
| the Statements of Financial |
| |||
Industry Sector |
| Recognized Liabilities |
| Position |
| Position |
| |||
Futures |
|
|
|
|
|
|
| |||
Agriculture |
| $ | 154,232 |
| $ | 141,311 |
| $ | 12,921 |
|
Currencies |
| 71,651 |
| 71,651 |
| — |
| |||
Energy |
| 38,882 |
| 38,882 |
| — |
| |||
Interest rates |
| 12,913 |
| 12,913 |
| — |
| |||
Metals |
| 115,082 |
| 74,783 |
| 40,299 |
| |||
Stock indices |
| 194,603 |
| 71,013 |
| 123,590 |
| |||
Subtotal |
| 587,363 |
| 410,553 |
| 176,810 |
| |||
|
|
|
|
|
|
|
| |||
Total Derivatives subject to a master netting or similar arrangement |
| 587,363 |
| 410,553 |
| 176,810 |
| |||
Total Derivatives not subject to a master netting or similar arrangement |
| — |
| — |
| — |
| |||
|
|
|
|
|
|
|
| |||
Total Derivatives |
| $ | 587,363 |
| $ | 410,553 |
| $ | 176,810 |
|
As of 3/31/2013
Collateral Held by Counterparty:
|
|
|
| Gross Amounts not offset in the Statements of |
|
|
| |||
|
|
|
| Financial Condition |
|
|
| |||
|
| Net Amount of Unrealized Profit |
| Cash Collateral |
| Net |
| |||
Counterparty |
| in the Statements of Financial Position |
| Received |
| Amount |
| |||
|
|
|
|
|
|
|
| |||
Counterparty A |
| $ | 30,179 |
| $ | — |
| $ | — |
|
|
| $ | 30,179 |
| $ | — |
| $ | — |
|
|
|
|
|
|
|
|
| |||
|
| Net Amount of Unrealized Loss |
| Cash Collateral |
| Net |
| |||
Counterparty |
| in the Statements of Financial Position |
| Pledged |
| Amount |
| |||
|
|
|
|
|
|
|
| |||
Counterparty A |
| $ | — |
| $ | — |
| $ | — |
|
|
| $ | — |
| $ | — |
| $ | — |
|
As of 12/31/2012
Collateral Held by Counterparty:
|
|
|
| Gross Amounts not offset in the Statements of |
|
|
| |||
|
|
|
| Financial Condition |
|
|
| |||
|
| Net Amount of Unrealized Profit |
| Cash Collateral |
| Net |
| |||
Counterparty |
| in the Statements of Financial Position |
| Received |
| Amount |
| |||
|
|
|
|
|
|
|
| |||
Counterparty A |
| $ | — |
| $ | — |
| $ | — |
|
|
| $ | — |
| $ | — |
| $ | — |
|
|
|
|
|
|
|
|
| |||
|
| Net Amount of Unrealized Loss |
| Cash Collateral |
| Net |
| |||
Counterparty |
| in the Statements of Financial Position |
| Pledged |
| Amount |
| |||
|
|
|
|
|
|
|
| |||
Counterparty A |
| $ | 91,517 |
| $ | 91,517 |
| $ | — |
|
|
| $ | 91,517 |
| $ | 91,517 |
| $ | — |
|
Concentration Risk
The amount of required margin and good faith deposit with the broker usually ranged from 1% to 10% of the members’ capital of the Company. There was no such requirement at March 31, 2013. The cash and cash equivalents held to satisfy such requirement at December 31, 2012 was $2,095,713 which equaled 7.05% of the Members’ capital.
9. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2011, FASB issued ASU 2011-11, Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”), which requires entities to disclose information about financial instructions and derivative instruments that have been offset or that subject to enforceable master netting agreements, to enable users of its financial statements to understand the effect of those arrangements on its financial statements to understand the effect of those arrangements on its financial position. Entities are required to provide both net (offset amounts) and gross information in the notes to the financial statements for relevant assets and liabilities that are offset or subject to the arrangements. The amendments in ASU 2011-11 are effective for interim and annual periods beginning on or after January 1, 2013, and an entity should provide the disclosures required by the amendments retrospectively for all comparable periods presented. The adoption of additional disclosure requirements are reflected in the Company’s financial statements in Note 8.
In January 2013, FASB issued ASU 2013-01, Balance Sheet (Topic 210), clarifying the scope of the disclosure about Offsetting Assets and Liabilities (“ASU 2013-01”). This update clarifies that the scope of ASU 2011-11 applied to derivatives accounted for in accordance with Topic 815. This update is in effect for interim and annual periods beginning on or after January 1, 2013, and an entity should provide the disclosures required by the amendments retrospectively for all the comparable periods presented. The adoption of additional disclosure requirements are reflected in the Company’s financial statements in Note 8.
10. SUBSEQUENT EVENTS
BRIM has evaluated the impact of all subsequent events of the Company through the date these financial statements were available to be issued, and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements, other than as described below.
* * * * * * * * * * * * *
To the best of the knowledge and belief of the
undersigned, the information contained in this
report is accurate and complete.
Michael Pungello
Chief Financial Officer
of Nets Global Horizons, LLC
and
Managing Director of
BlackRock Investment Management, LLC
General Partner of
BlackRock Global Horizons I L.P. and
Manager of
Nets Global Horizons, LLC